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REVENUE 
ACT 
of  1918 


Approved  by 

President  Woodrow  Wilson 
February  24,  1919 


HJ 237? 

ASI 


Compliment*  of 


The  American  Exchange  National  Bank 

NEW  YORK  CITY 


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A  S 1 


AN  ACT 

To  provide  revenue,  and  for  other  purposes. 

Be  it  enacted  by  the  Senate  and  House  of 
Representatives  of  the  United  States  of  Amer¬ 
ica  in  Congress  assembled , 

TITLE  I.— GENERAL  DEFINITIONS. 

Definitions:  “Person,”  “Corporation,” 

“Domestic,”  “Foreign,”  “United  States,” 
“Secretary,”  “Commissioner,”  “Collector,” 
“Revenue  Act  of  1916,”  “Revenue  Act  of 
1917,”  “Taxpayer,”  “Government  Contract,” 
“Military  or  Naval  Forces  of  the  United 
States,”  “Present  War,”  “Government  Con¬ 
tract  Made  Between  April  6,  1917,  and 
Nov.  11*1918”  . 

Sec.  1.  That  when  used  in  this  Act — 

The  term  “person”  includes  partnerships 
and  corporations  as  well  as  individuals ; 

The  term  “corporation”  includes  associa¬ 
tions,  joint  stock  companies,  and  insurance 
companies ; 

The  term  “domestic”  when  applied  to  a 
corporation  or  partnership  means  created  or 
organized  in  the  United  States; 

The  term  “foreign”  when  applied  to  a 
corporation  or  partnership  means  created 
or  organized  outside  the  United  ^States ; 

The  term  “United  States”  when  used  in 
a  geographical  sense  includes  only  the 
States,  the  Territories  of  Alaska  and 
Hawaii,  and  the  District  of  Columbia; 

The  term  “Secretary”  means  the  Secre¬ 
tary  of  the  Treasury ; 

The  term  “Commissioner”  means  the 
Commissioner  of  Internal  Revenue; 

The  term  “collector”  means  collector  of 
internal  revenue ; 

The  term  “Revenue  Act  of  1916”  means 
the  Act  entitled  “An  Act  to  increase  the 
revenue,  and  for  other  purposes,”  approved 
September  8,  1916; 

The  term  “Revenue  Act  of  1917”  means 
the  Act  entitled  “An  Act  to  provide  revenue 
to  defray  war  expenses,  and  for  other  pur¬ 
poses.”  approved  October  3,  1917 ; 


The  term  “taxpayer”  includes  any  person, 
trust  or  estate  subject  to  a  tax  imposed  by 
this  Act; 

The  term  “Government  contract”  means 
(a)  a  contract  made  with  the  United  States, 
or  with  any  department,  bureau,  officer, 
commission,  board,  or  agency,  under  the 
United  States  and  acting  in  its  behalf,  or 
with  any  agency  controlled  by  any  of  the 
above  if  the  contract  is  for  the  benefit  of 
the  United  States,  or  (b)  a  subcontract 
made  with  a  contractor  performing  such  a 
contract  if  the  products  or  services  to  be 
furnished  under  the  subcontract  are  for  the 
benefit  of  the  United  States.  The  term 
“Government  Contract  or  Contracts  made 
between  April  6,  1917,  and  November  11, 
1918,  both  dates  inclusive”  when  applied  to 
a  contract  of  the  kind  referred  to  in  clause 
(a)  of  this  paragraph,  includes  all  such  con¬ 
tracts  which,  although  entered  into  during 
such  period,  were  originally  not  enforceable, 
but  which  have  been  or  may  become  en¬ 
forceable  by  reason  of  subsequent  valida¬ 
tion  in  pursuance  of  law; 

The  term  “military  or  naval  forces  of  the 
United  States”  includes  the  Marine  Corps, 
the  Coast  Guard,  the  Army  Nurse  Corps, 
Female,  and  the  Navy  Nurse  Corps,  Fe¬ 
male,  but  this  shall  not  be  deemed  to  ex¬ 
clude  other  units  otherwise  included  within 
such  term ; 

The  term  “present  war”  means  the  war 
in  which  the  United  States  is  now  engaged 
against  the  German  Government. 

For  the  purposes  of  this  Act  the  date  of 
the  termination  of  the  present  war  shall  be 
fixed  by  proclamation  of  the  President. 

TITLE  II.— INCOME  TAX. 

Part  I. — General  Provisions. 

Definitions:  “Taxable  Year,”  “Fiduciary,” 

“Withholding  Agent,”  “Personal  Serv¬ 
ice  Corporation,”  “Paid.” 

Sec.  200.  That  when  used  in  this  title — 

The  term  “taxable  year”  means  the  cal¬ 
endar  year,  or  the  fiscal  year  ending  dur¬ 
ing  such  calendar  year,  upon  the  basis  of 
which  the  net  income  is  computed  under 
section  212  or  section  232.  The  term  “fiscal 

—  2  — 


year”  means  an  accounting  period  of  twelve 
months  ending  on  the  last  day  of  any  month 
other  than  December.  The  first  taxable 
year,  to  be  called  the  taxable  year  1918, 
shall  be  the  calendar  year  1918  or  any  fiscal 
year  ending  during  the  calendar  year  1918; 

The  term  “fiduciary”  means  a  guardian, 
trustee,  executor,  administrator,  receiver, 
conservator,  or  any  person  acting  in  any 
fiduciary  capacity  for  any  person,  trust  or 
estate ; 

The  term  “withholding  agent”  means  any 
person  required  to  deduct  and  withhold  any 
tax  under  the  provisions  of  section  221  or 
section  237 ; 

The  term  “personal  service  corporation” 
means  a  corporation  whose  income  is  to  be 
ascribed  primarily  to  the  activities  of  the 
principal  owners  or  stockholders  who  are 
themselves  regularly  engaged  in  the  active 
conduct  of  the  affairs  of  the  corporation 
and  in  which  capital  (whether  invested  or 
borrowed)  is  not  a  material  income-pro¬ 
ducing  factor;  but  does  not  include  any 
foreign  corporation,  nor  any  corporation  50 
per  centum  or  more  of  whose  gross  income 
consists  either  (1)  of  gains,  profits,  or  in¬ 
come  derived  from  trading  as  a  principal, 
or  (2)  of  gains,  profits,  commissions,  or 
other  income,  derived  from  a  government 
contract  or  contracts  made  between  April 
6,  1917,  and  November  11,  1918,  both  dates 
inclusive ; 

The  term  “Paid,”  for  the  purposes  of  the 
deductions  and  credits  under  this  title, 
means  “Paid  or  Accrued”  or  “Paid  or  In¬ 
curred,”  and  the  terms  “Paid  or  Incurred” 
and  “Paid  or  Accrued”  shall  be  construed 
according  to  the  method  of  accounting  upon 
the  basis  of  which  the  net  income  is  com¬ 
puted  under  section  212. 

Dividends. 

Sec.  201.  (a)  That  the  term  “dividend” 

when  used  in  this  title  (except  in  paragraph 
(10)  or  subdivision  (a)  of  section  234) 
means  (1)  any  distribution  made  by  a  cor¬ 
poration,  other  than  a  personal  service  cor¬ 
poration,  to  its  shareholders  or  members, 
whether  in  cash  or  in  other  property  or  in 
stock  of  the  corporation,  out  of  its  earnings 
or  profits  accumulated  since  February  28, 

—  3  — 


1913,  or  (2)  any  such  distribution  made  by 
a  personal  service  corporation  out  of  its 
earnings  or  profits  accumulated  since  Feb¬ 
ruary  28,  1913,  and  prior  to  January  1,  1918. 

Distribution  of  Dividends. 

(b)  Any  distribution  shall  be  deemed  to 
have  been  made  from  earnings  or  profits 
unless  all  earnings  and  profits  have  first 
been  distributed.  Any  distribution  made  in 
the  year  1918  or  any  year  thereafter  shall 
be  deemed  to  have  been  made  from  earnings 
or  profits  accumulated  since  February  28, 
1913,  or,  in  the  case  of  a  personal  service 
corporation,  from  the  most  recently  ac¬ 
cumulated  earnings  or  profits ;  but  any 
earnings  or  profits  accumulated  prior  to 
March  1,  1913,  may  be  distributed  in  stock 
dividends  or  otherwise,  exempt  from  the 
tax,  after  the  earnings  and  profits  accumu¬ 
lated  since  February  28,  1913,  have  been 
distributed. 


Stock  Dividends. 

(c)  A  dividend  paid  in  stock  of  the  cor¬ 
poration  shall  be  considered  income  to  the 
amount  of  the  earnings  or  profits  distrib¬ 
uted.  Amounts  distributed  in  the  liquida¬ 
tion  of  a  corporation  shall  be  treated  as  pay¬ 
ments  in  exchange  for  stock  or  shares,  and 
any  gain  or  profit  realized  thereby  shall  be 
taxed  to  the  distributee  as  other  gains  or 
profits. 

(d)  If  any  stock  dividend  (1)  is  received 
by  a  taxpayer  between  January  1  and  No¬ 
vember  1,  1918,  both  dates  inclusive,  or  (2) 
is  during  such  period  bona  fide  authorized 
or  declared,  and  entered  on  the  books  of 
the  corporation,  and  is  received  by  a  tax¬ 
payer  after  November  1,  1918,  and  before 
the  expiration  of  thirty  days  after  the  pas¬ 
sage  of  this  Act,  then  such  dividend  shall, 
in  the  manner  provided  in  section  206,  be 
taxed  to  the  recipient  at  the  rates  prescribed 
by  law  for  the  years  in  which  the  cor¬ 
poration  accumulated  the  earnings  or  profits 
from  which  such  dividend  was  paid,  but  the 
dividend  shall  be  deemed  to  have  been  paid 
from  the  most  recently  accumulated  earn¬ 
ings  or  profits. 

—  4  — 


When  Distribution  Considered  from  Profits 
of  Preceding  Taxable  Year. 

(e)  Any  distribution  made  during  the 
first  sixty  days  of  any  taxable  year  shall  be 
deemed  to  have  been  made  from  earnings 
or  profits  accumulated  during  preceding  tax¬ 
able  years ;  but  any  distribution  made  dur¬ 
ing  the  remainder  of  the  taxable  year  shall 
be  deemed  to  have  been  made  from  earnings 
or  profits  accumulated  between  the  close  of 
the  preceding  taxable  year  and  the  date  of 
distribution,  to  the  extent  of  such  earnings 
or  profits,  and  if  the  books  of  the  corpora¬ 
tion  do  not  show  the  amount  of  such  earn¬ 
ings  or  profits,  the  earnings  or  profits  for 
the  accounting  period  within  which  the  dis¬ 
tribution  was  made  shall  be  deemed  to  have 
been  accumulated  ratably  during  such 
period. 

Basis  for  Determining  Gain  or  Loss — Value 
of  Property  Determined. 

Sec.  202.  (a)  That  for  the  purpose  of 

ascertaining  the  gain  derived  or  loss  sus¬ 
tained  from  the  sale  or  other  disposition  of 
property,  real,  personal,  or  mixed,  the  basis 

shall  be —  - 

(1)  In  the  case  of  property  acquired  be¬ 
fore  March  1,  1913,  the  fair  market  price  or 
value  of  such  property  as  of  that  date ;  and 

(2)  In  the  case  of  property  acquired  on 
or  after  that  date,  the  cost  thereof ;  or  the 
inventory  value,  if  the  inventory  is  made  in 
accordance  with  section  203. 

Exchange  of  Property  Loss  or  Gain  Deter¬ 
mined  —  Consolidation,  Merger  —  Ex¬ 
change  of  Similar  Values. 

(b)  When  property  is  exchanged  for 
other  property,  the  property  received  in  ex¬ 
change  shall  for  the  purpose  of  determin¬ 
ing  gain  or  loss  be  treated  as  the  equivalent 
*  of  cash  to  the  amount  of  its  fair  market 
value,  if  any;  but  when  in  connection  with 
the  reorganization,  merger,  or  consolidation 
of  a  corporation  a  persoh  receives  in  place  of 
stock  or  securities  owned  by  him  new  stock 
or  securities  of  no  greater  aggregate  par  or 
face  value,  no  gain  or  loss  shall  be  deemed 
to  occur  from  the  exchange,  and  the  new 
stock  or  securities  received  shall  be  treated 


—  5  — 


as  taking  the  place  of  the  stock,  securities, 
or  property  exchanged. 

When  in  the  case  of  any  such  reorganiza¬ 
tion,  merger  or  consolidation  the  aggregate 
par  or  face  value  of  the  new  stock  or  secur¬ 
ities  received  is  in  excess  of  the  aggregate 
par  or  face  value  of  the  stock  or  securities 
exchanged,  a  like  amount  in  par  or  face 
value  of  the  new  stock  or  securities  received 
shall  be  treated  as  taking  the  place  of  the 
stock  or  securities  exchanged,  and  the 
amount  of  the  excess  in  par  or  face  value 
shall  be  treated  as  a  gain  to  the  extent  that 
the  fair  market  value  of  the  new  stock  or 
securities  is  greater  than  the  cost  (or  if 
acquired  prior  to  March  1,  1913,  the  fair 
market  value  as  of  that  date)  of  the  stock 
or  securities  exchanged. 

Inventories. 

Sec.  203.  That  whenever  in  the  opinion 
of  the  Commissioner  the  use  of  inventories 
is  necessary  in  order  clearly  to  determine 
the  income  of  any  taxpayer,  inventories 
shall  be  taken  by  such  taxpayer  upon  such 
basis  as  the  Commissioner,  with  the  ap¬ 
proval  of  the  Secretary,  may  prescribe  as 
conforming  as  nearly  as  may  be  to  the  best 
accounting  practice  in  the  trade  or  business 
and  as  most  clearly  reflecting  the  income. 

Net  Losses. 

Sec.  204  (a)  That  as  used  in  this  sec¬ 

tion  the  term  “net  loss”  refers  only  to  net 
losses  resulting  from  either  (1)  the  oper¬ 
ation  of  any  business  regularly  carried  on 
by  the  taxpayer,  or  (2)  the  bona  fide  sale 
by  the  taxpayer  of  plant,  buildings,  ma¬ 
chinery,  equipment  or  other  facilities,  con¬ 
structed,  installed  or  acquired  by  the  tax¬ 
payer  on  or  after  April  6,  1917,  for  the  pro¬ 
duction  of  articles  contributing  to  the  prose¬ 
cution  of  the  present  war ;  and  when  so  re¬ 
sulting  means  the  excess  of  the  deductions 
allowed  by  law  (excluding  in  the  case  of 
corporations  amounts  allowed  as  a  deduc¬ 
tion  under  paragraph  (6)  of  subdivision  (a) 
of  section  234)  over  the  sum  of  the  gross 
income  plus  any  interest  received  free  from 
taxation  both  under  this  title  and  under 
Title  III. 


Excess  Payments — Deductible  Succeeding 

Year. 

(b)  If  for  any  taxable  year  beginning  af¬ 
ter  October  31,  1918,  and  ending  prior  to 
January  1,  1920,  it  appears  upon  the  produc¬ 
tion  of  evidence  satisfactory  to  the  Commis¬ 
sioner  that  any  taxpayer  has  sustained  a  net 
loss,  the  amount  of  such  net  loss  shall  un¬ 
der  regulations  prescribed  by  the  Commis¬ 
sioner  with  the  approval  of  the  Secretary  be 
deducted  from  the  net  income  of  the  tax¬ 
payer  for  the  preceding  taxable  year;  and 
the  taxes  imposed  by  this  title  and  by  Title 
III  for  such  preceding  taxable  year  shall  be 
redetermined  accordingly.  Any  amount 
found  to  be  due  to  the  taxpayer  upon  the 
basis  of  such  redetermination  shall  be  cred¬ 
ited  or  refunded  to  the  taxpayer  in  accord¬ 
ance  with  the  provisions  of  section  252.  If 
such  net  loss  is  in  excess  of  the  net  income 
for  such  preceding  taxable  year,  the  amount 
of  such  excess  shall  under  regulations  pre¬ 
scribed  by  the  Commissioner  with  the  ap¬ 
proval  of  the  Secretary  be  allowed  as  a  de¬ 
duction  in  computing  the  net  income  for  the 
succeeding  taxable  year. 

(c)  The  benefit  of  this  section  shall  be 
allowed  to  the  members  of  a  partnership 
and  the  beneficiaries  of  an  estate  or  trust 
under  regulations  prescribed  by  the  Com¬ 
missioner  with  the  approval  of  the  Secre¬ 
tary. 

Fiscal  Year  With  Different  Rates — Method 
of  Determining  and  Applying  the 
Different  Rates. 

Sec.  205.  (a)  That  if  a  taxpayer  makes 

return  for  a  fiscal  year  beginning  in  1917 
and  ending  in  1918,  his  tax  under  this  title 
for  the  first  taxable  year  shall  be  the  sum 
of:  (1)  The  same  proportion  of  a  tax  for 
the  entire  period  computed  under  Title  I  of 
the  Revenue  Act  of  1916  as  amended  by  the 
Revenue  Act  of  1917  and  under  Title  I  of 
the  Revenue  Act  of  1917,  which  the  portion 
of  such  period  falling  within  the  calendar 
year  1917  is  of  the  entire  period,  and  (2) 
the  same  proportion  of  a  tax  for  the  entire 
period  computed  under  this  title  at  the  rates 
for  the  calendar  year  1918  which  the  por¬ 
tion  of  such  period  falling  within  the  calen- 

—  7  — 


dar  year  1918  is  of  the  entire  period:  Pro¬ 
vided,  That  in  the  case  of  a  personal  service 
corporation  the  amount  to  be  paid  shall  be 
only  that  specified  in  clause  (1). 

Any  amount  heretofore  or  hereafter  paid 
on  account  of  the  tax  imposed  for  such  fiscal 
year  by  Title  I  of  the  Revenue  Act  of  1916 
as  amended  by  the  Revenue  Act  of  1917, 
and  by  Title  I  of  the  Revenue  Act  of  1917, 
shall  be  credited  towards  the  payment  of 
the  tax  imposed  for  such  fiscal  year  by  this 
Act,  and  if  the  amount  so  paid  exceeds  the 
amount  of  such  tax  imposed  by  this  Act,  or, 
in  the  case  of  a  personal  service  corporation, 
the  amount  specified  in  clause  (1),  the  ex¬ 
cess  shall  be  credited  or  refunded  in  accord¬ 
ance  with  the  provisions  of  section  252. 

(b)  If  a  taxpayer  makes  a  return  for  a 
fiscal  year  beginning  in  1918  and  ending  in 
1919,  the  tax  under  this  title  for  such  fiscal 
year  shall  be  the  sum  of:  (1)  the  same  pro¬ 
portion  of  a  tax  for  the  entire  period  com¬ 
puted  under  this  title  at  the  rates  specified 
for  the  calendar  year  1918  which  the  portion 
of  such  period  falling  within  the  calendar 
year  1918  is  of  the  entire  period,  and  (2) 
the  same  proportion  of  a  tax  for  the  entire 
period  computed  under  this  title  at  the  rates 
specified  for  the  calendar  year  1919  whi<;h 
the  portion  of  such  period  falling  within  the 
calendar  year  1919  is  of  the  entire  period. 

(c)  If  a  fiscal  year  of  a  partnership  be¬ 
gins  in  1917  and  ends  in  1918  or  begins  in 
1918  and  ends  in  1919,  then  notwithstanding 
the  provisions  of  subdivision  (b)  of  section 
218,  (1)  the  rates  for  the  calendar  year  dur¬ 
ing  which  such  fiscal  year  begins  shall  apply 
to  an  amount  of  each  partner’s  share  of  such 
partnership  net  income  (determined  under 
the  law  applicable  to  such  year)  equal  to 
the  proportion  which  the  part  of  such  fiscal 
year  falling  within  such  calendar  year  bears 
to  the  full  fiscal  year,  and  (2)  the  rates  for 
the  calendar  year  during  which  such  fiscal 
year  ends  shall  apply  to  an  amount  of  each 
partner’s  share  of  such  partnership  net  in¬ 
come  (determined  under  the  law  applicable 
to  such  calendar  year)  equal  to  the  propor¬ 
tion  which  the  part  of  such  fiscal  year  fall¬ 
ing  within  such  calendar  year  bears  to  the 
full  fiscal  year:  Provided ,  That  in  the  case 

—  8  — 


of  a  personal  service  corporation  with  re¬ 
spect  to  a  fiscal  year  beginning  in  1917  and 
ending  in  1918,  the  amount  specified  in 
clause  (1)  shall  not  be  subject  to  normal 
tax. 

Parts  of  Income  Subject  to  Rates  for 
Different  Years — Method  of 
Determining  Same. 

Sec.  206.  That  whenever  parts  of  a  tax¬ 
payer’s  income  are  subject  to  rates  for  dif¬ 
ferent  calendar  years,  the  part  subject  to 
the  rates  for  the  most  recent  calendar  year 
shall  be  placed  in  the  lower  brackets  of  the 
rate  schedule  provided  in  this  title,  the  part 
subject  to  the  rates  for  the  next  preceding 
calendar  year  shall  be  placed  in  the  next 
higher  brackets  of  the  rate  schedule  applic¬ 
able  to  that  year,  and  so  on  until  the  en¬ 
tire  net  income  has  been  accounted  for.  In 
determining  the  income,  any  deductions,  ex¬ 
emptions  or  credits  of  a  kind  not  plainly  and 
properly  chargeable  against  the  income  tax¬ 
able  at  rates  for  a  preceding  year  shall  first 
be  applied  against  the  income  subject  to 
rates  for  the  most  recent  calendar  year;  but 
any  balance  thereof  shall  be  applied  against 
the  income  subject  to  the  rates  of  the  next 
preceding  year  or  years  until  fully  allowed. 

PART  II.— INDIVIDUALS. 

Normal  Tax. 

Sec.  210.  That,  in  lieu  of  the  taxes  im¬ 
posed  by  subdivision  (a)  of  section  1  of  the 
Revenue  Act  of  1916  and  by  section  1  of 
the  Revenue  Act  of  1917,  there  shall  be  lev¬ 
ied,  collected,  and  paid  for  each  taxable 
year  upon  the  net  income  of  every  individ¬ 
ual  a  normal  tax  at  the  following  rates : 

(a)  For  the  calendar  year  1918,  12  per 
centum  of  the  amount  of  the  net  income  in 
excess  of  the  credits  provided  in  section 
216:  Provided,  That  in  the  case  o£  a  citizen 
or  resident  of  the  United  States  the  rate 
upon  the  first  $4,000  of  such  excess  amount 
shall  be  6  per  centum; 

(b)  For  each  calendar  year  thereafter,  8 
per  centum  of  the  amount  of  the  net  income 
in  excess  of  the  credits  provided  in  section 
216:  Provided,  That  in  the  case  of  a  citi¬ 
zen  or  resident  of  the  United  States  the 


—  9  — 


rate  upon  the  first  $4,000  of  such  excess 
amount  shall  be  4  per  centum. 

Surtax. 

Sec.  211.  (a)  That,  in  lieu  of  the  taxes 

imposed  by  subdivision  (b)  of  section  1  of 
the  Revenue  Act  of  1916  and  by  section  2 
of  the  Revenue  Act  of  1917,  but  in  addition 
to  the  normal  tax  imposed  by  section  210 
of  this  Act,  there  shall  be  levied,  collected, 
and  paid  for  each  taxable  year  upon  the  net 
income  of  every  individual,  a  surtax  equal 
to  the  sum  of  the  following: 

1  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $5,000  and  does  not  ex¬ 
ceed  $6,000; 

2  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $6,000  and  does  not  ex¬ 
ceed  $8,000; 

3  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $8,000  and  does  not  ex¬ 
ceed  $10,000; 

4  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $10,000  and  does  not  ex¬ 
ceed  $12,000; 

5  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $12,000  and  does  not  ex¬ 
ceed  $14,000; 

6  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $14,000  and  does  not  ex¬ 
ceed  $16,000; 

7  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $16,000  and  does  not  ex¬ 
ceed  $18,000; 

8  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $18,000  and  does  not  ex¬ 
ceed  $20,000; 

9  per  centum  of  the  amount  by  which  the 
net  amount  exceeds  $20,000  and  does  not  ex¬ 
ceed  $22,000 ; 

10  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $22,000  and  does  not  ex¬ 
ceed  $24,000; 

11  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $24,000  and  does  not  ex¬ 
ceed  $26,000; 

12  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $26,000  and  does  not  ex¬ 
ceed  $28,000; 

13  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $28,000  and  does  not  ex¬ 
ceed  $30,000; 


—  10  — 


14  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $30,000  and  does  not  ex¬ 
ceed  $32,000; 

15  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $32,000  and  does  not  ex¬ 
ceed  $34,000; 

16  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $34,000  and  does  not  ex¬ 
ceed  $36,000; 

17  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $36,000  and  does  not  ex¬ 
ceed  $38,000 ; 

18  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $38,000  and  does  not  ex¬ 
ceed  $40,000; 

19  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $40,000  and  does  not  ex¬ 
ceed  $42,000; 

20  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $42,000  and  does  not  ex¬ 
ceed  $44,000; 

21  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $44,000  and  does  not  ex¬ 
ceed  $46,000 ; 

22  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $46,000  and  does  not  ex¬ 
ceed  $48,000; 

23  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $48,000  and  does  not  ex¬ 
ceed  $50,000; 

24  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $50,000  and  does  not  ex¬ 
ceed  $52,000 ; 

25  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $52,000  and  does  not 
exceed  $54,000; 

26  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $54,000  and  does  not 
exceed  $56,000; 

27  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $56,000  and  does  not 
exceed  $58,000 ; 

28  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $58,000  and  does  not 
exceed  $60,000; 

29  per  centum  of  the  amount  by  which  the 
net  income  exceeds  $60,000  and  does  not  ex¬ 
ceed  $62,000; 

30  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $62,000  and  does  not 
exceed  $64,000; 


11 


31  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $64,000  and  does  not 
exceed  $66,000; 

32  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $66,000  and  does  not 
exceed  $68,000; 

33  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $68,000  and  does  not 
exceed  $70,000; 

34  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $70,000  and  does  not 
exceed  $72,000; 

35  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $72,000  and  does  not 
exceed  $74,000; 

36  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $74,000  and  does  not 
exceed  $76,000; 

37  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $76,000  and  does  not 
exceed  $78,000; 

38  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $78,000  and  does  not 
exceed  $80,000; 

39  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $80,000  and  does  not 
exceed  $82,000; 

40  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $82,000  and  does 
not  exceed  $84,000; 

41  per  centum  of  the  amount  by  which 
me  net  income  exceeds  $84,000  and  does 
not  exceed  $86,000; 

42  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $86,000  and  does  not 
exceed  $88,000; 

43  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $88,000  and  does  not 
exceed  $90,000; 

44  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $90,000  and  does  not 
exceed  $92,000; 

45  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $92,000  and  does  not 
exceed  $94,000 ; 

46  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $94,000  and  does  not 
exceed  $96,000; 

47  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $96,000  and  does  not 
exceed  $98,000; 

48  per  centum  of  the  amount  by  which 

—  12  — 


the  net  income  exceeds  $98,000  and  does  not 
exceed  $100,000; 

52  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $100,000  and  does 
not  exceed  $150,000; 

56  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $150,000  and  does 
not  exceed  $200,000 ; 

60  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $200,000  and  does 
not  exceed  $300,000; 

63  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $300,000  and  does 
not  exceed  $500,000; 

64  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $500,000  and  does 
not  exceed  $1,000,000; 

65  per  centum  of  the  amount  by  which 
the  net  income  exceeds  $1,000,000. 

Sale  of  Mines,  Oil  or  Gas  Wells — How 
Valued — How  Taxed. 

(b)  In  the  case  of  a  bona  fide  sale  of 
mines,  oil  or  gas  wells,  or  any  interest  there¬ 
in.  where  the  principal  value  of  the  prop¬ 
erty  has  been  demonstrated  by  prospecting 
or  exploration  and  discovery  work  done 
by  the  taxpayer,  the  portion  of  the 
tax  imposed  by  this  section  attributable  to 
such  sale  shall  not  exceed  20  per  centum  of 
the  selling  price  of  such  property  or  interest. 

Net  Income  Defined — Basis  of  Computa¬ 
tions — Accounting  Methods — Fiscal 
or  Calendar  Year. 

Sec.  212  (a)  That  in  the  case  of  an  in¬ 

dividual  the  term  “net  income”  means  the 
gross  income  as  defined  in  section  213,  less 
the  deductions  allowed  by  section  214. 

(b)  The  net  income  shall  be  computed 
upon  the  basis  of  the  taxpayer's  annual  ac¬ 
counting  period  (fiscal  year  or  calendar 
year,  as  the  case  may  be)  in  accordance  with 
the  method  of  accounting  regularly  em¬ 
ployed  in  keeping  the  books  of  such  tax¬ 
payer;  but  if  no  such  method  of  accounting 
has  been  so  employed,  or  if  the  method  em¬ 
ployed  does  not  clearly  reflect  the  income, 
the  computation  shall  be  made  upon  such 
basis  and  in  such  manner  as  in  the  opinion 
of  the  Commissioner  does  clearly  reflect  the 
income.  If  the  taxpayer’s  annual  account- 

—  13  — 


ing  period  is  other  than  a  hscal  year  as  de¬ 
fined  in  section  200  or  if  the  taxpayer  has 
no  annual  accounting  period  or  does  not 
keep  books,  the  net  income  shall  be  com¬ 
puted  on  the  basis  of  the  calendar  year. 

If  a  taxpayer  changes  his  accounting 
period  from  fiscal  year  to  calendar  year, 
from  calendar  year  to  fiscal  year,  or  from 
one  fiscal  year  to  another,  the  net  income 
shall,  with  the  approval  of  the  Commis¬ 
sioner,  be  computed  on  the  basis  of  such 
new  accounting  period,  subject  to  the  pro¬ 
visions  of  section  226. 

Gross  Income  Defined. 

Sec.  213.  That  for  the  purposes  of  this 
title  (except  as  otherwise  provided  in  sec¬ 
tion  233)  the  term  “gross  income” — 

(a)  Includes  gains,  profits,  and  income 
derived  from  salaries,  wages,  or  compensa¬ 
tion  for  personal  service  (including  in  the 
case  of  the  President  of  the  United  States, 
the  judges  of  the  Supreme  and  inferior 
courts  of  the  United  States,  and  all  other 
officers  and  employees,  whether  elected  or 
appointed,  of  the  United  States,  Alaska, 
Hawaii,  or  any  political  subdivision  thereof, 
or  the  District  of  Columbia,  the  compensa¬ 
tion  received  as  such),  of  whatever  kind 
and  in  whatever  form  paid,  or  from  profes¬ 
sions,  vocations,  trades,  businesses,  com¬ 
merce,  or  sales,  or  dealings  in  property, 
whether  real  or  personal,  growing  out  of 
the  ownership  or  use  of  or  interest  in  such 
property;  also  from  interest,  rent,  dividends, 
securities,  or  the  transaction  of  any  business 
carried  on  for  gain  or  profit,  or  gains  or 
profits  and  income  derived  from  any  source 
whatever.  The  amount  of  all  such  items 
shall  be  included  in  the  gross  income  for  the 
taxable  year  in  which  received  by  the  tax¬ 
payer,  unless,  under  methods  of  accounting 
permitted  under  subdivision  (b)  of  section 
212,  any  such  amounts  are  to  be  properly 
accounted  for  as  of  a  different  period;  but 

(b)  Does  not  include  the  following  items, 
which  shall  be  exempt  from  taxation  under 
this  title: 

Items  Not  Taxable — Exemptions. 

(1)  The  proceeds  of  life  insurance  poli¬ 
cies  paid  upon  the  death  of  the  insured 

—  14  — 


to  individual  beneficiaries  or  to  the  estate  of 

the  insured ; 

(2)  The  amount  received  by  the  insured 
as  a  return  of  premium  or  premiums  paid 
by  him  under  life  insurance,  endowment,  or 
annuity  contracts,  either  during  the  term  or 
at  the  maturity  of  the  term  mentioned  in 
the  contract  or  upon  surrender  of  the  con¬ 
tract  ; 

(3)  The  value  of  property  acquired  by 
gift,  bequest,  devise,  or  descent  (but  the  in¬ 
come  from  such  property  shall  be  included 
in  gross  income)  ; 

(4;  Interest  upon  (a)  the  obligations  of 
a  State,  Territory,  or  any  political  sub¬ 
division  thereof,  or  the  District  of  Columbia 
or  (b)  securities  issued  under  the  provisions 
of  the  Federal  Farm  Loan  Act  of  July  17, 
1916;  or  (c)  the  obligations  of  the  United 
States  or  its  possessions;  or  (d)  bonds  is¬ 
sued  by  the  War  Finance  Corporation: 
Provided,  That  every  person  owning  any  of 
the  obligations,  securities  or  bonds  enu¬ 
merated  in  clauses  (a),  (b),  (c),  and  (d) 
shall,  in  the  return  required  by  this  title,  sub¬ 
mit  a  statement  showing  the  number  and 
amount  of  such  obligations,  securities  and 
bonds  owned  by  him  and  the  income  re¬ 
ceived  therefrom,  in  such  form  and  with 
such  information  as  the  Commissioner  may 
require.  In  the  case  of  obligations  of  the 
United  States  issued  after  September  1, 
1917,  and  in  the  case  of  bonds  issued  by 
the  War  Finance  Corporation,  the  interest 
shall  be  exempt  only  if  and  to  the  extent 
provided  in  the  respective  Acts  authorizing 
the  issue  thereof  as  amended  and  supple¬ 
mented,  and  shall  be  excluded  from  gross 
income  only  if  and  to  the  extent  it  is  wholly 
exempt  from  taxation  to  the  taxpayer  both 
under  this  title  and  under  Title  III ; 

Income  of  Foreign  Governments  from 
Investments  in  the  United  States. 

(5)  The  income  of  foreign  governments 
received  from  investments  in  the  United 
States  in  stocks,  bonds,  or  other  domestic 
securities,  owned  by  such  foreign  govern¬ 
ments,  or  from  interest  on  deposits  in  banks 
in  the  United  States  of  moneys  belonging 
to  such  foreign  governments,  or  from  any 
other  source  within  the  United  States: 


(6)  Amounts  received,  through  accident 
or  health  insurance  or  under  workmen’s 
compensation  acts,  as  compensation  for  per¬ 
sonal  injuries  or  sickness,  plus  the  amount 
of  any  damages  received  whether  by  suit  or 
agreement  on  account  of  such  injuries  or 
sickness ; 

(7)  Income  derived  from  any  public  util¬ 
ity  or  the  exercise  of  any  essential  govern¬ 
mental  function  and  accruing  to  any  State, 
Territory,  or  the  District  of  Columbia,  or 
any  political  subdivision  of  a  State  or  Terri¬ 
tory,  or  income  accruing  to  the  government 
of  any  possession  of  the  United  States,  or 
any  political  subdivision  thereof. 

Whenever  any  State,  Territory,  or  the 
District  of  Columbia,  or  any  political  sub¬ 
division  of  a  State  or  Territory,  prior  to 
September  8,  1916,  entered  in  good  faith  into 
a  contract  with  any  person,  the  object  and 
purpose  of  which  is  to  acquire,  construct, 
operate,  or  maintain  a  public  utility,  no  tax 
shall  be  levied  under  the  provisions  of  this 
title  upon  the  income  derived  from  the  oper¬ 
ation  of  such  public  utility,  so  far  as  the 
payment  thereof  wil  impose  a  loss  or  bur¬ 
den  upon  such  State,  Territory,  District  of 
Columbia,  or  political  subdivision;  but  this 
provision  is  not  intended  to  confer  upon 
such  person  any  financial  gain  or  exemption 
or  to  relieve  such  person  from  the  payment 
of  a  tax  as  provided  for  in  this  title  upon 
the  part  or  portion  of  such  income  to  which 
such  person  is  entitled  under  such  contract; 

(8)  So  much  of  the  amount  received  dur¬ 
ing  the  present  war  by  a  person  in  the  mili¬ 
tary  or  naval  forces  of  the  United  States 
as  salary  or  compensation  in  any  form  from 
the  United  States  or  active  services  in  such 
forces  as  does  not  exceed  $3,500. 

Nonresident  Alien  Individuals — Gross 
Income  Defined. 

(c)  In  the  case  of  nonresident  alien  in¬ 
dividuals,  gross  income  includes  only  the 
gross  income  from  sources  within  the 
United  States,  including  interest  on  bonds, 
notes,  or  other  interest-bearing  obligations 
of  residents,  corporate  or  otherwise,  divi¬ 
dends  from  resident  corporations,  and  in¬ 
cluding  all  amounts  received  (although  paid 

—  16  — 


under  a  contract  for  the  sale  of  goods  or 
otherwise)  representing  profits  on  the 
manufacture  and  disposition  of  goods  with¬ 
in  the  United  States. 

Deductions  Allowed. 

Sec.  214.  (a)  That  in  computing  net  in¬ 
come  there  shall  be  allowed  as  deductions: 

Necessary  Expenses  of  Business. 

(1)  All  the  ordinary  and  necessary  ex¬ 
penses  paid  or  incurred  during  the  taxable 
year  in  carrying  on  any  trade  or  business, 
including  a  reasonable  allowance  for  salaries 
or  other  compensation  for  personal  services 
actually  rendered,  and  including  rentals  or 
other  payments  required  to  be  made  as  a 
condition  to  the  continued  use  or  possession, 
for  purposes  of  the  trade  or  business,  of 
property  to  which  the  taxpayer  has  not 
taken  or  is  not  taking  title  or  in  which  he 
has  no  equity ; 

Interest — When  Deductible. 

(2)  All  interest  paid  or  accrued  within 
the  taxable  year  on  indebtedness,  except  on 
indebtedness  incurred  or  continued  to  pur¬ 
chase  or  carry  obligations  or  securities 
(other  than  obligations  of  the  United  States 
issued  after  September  24,  1917),  the  inter¬ 
est  upon  which  is  wholly  exempt  from  tax¬ 
ation  under  this  title  as  income  to  the  tax¬ 
payer,  or,  in  the  case  of  a  nonresident  alien 
individual,  the  proportion  of  such  interest 
which'  the  amount  of  his  gross  income  from 
sources  within  the  United  States  bears  to 
the  amount  of  his  gross  income  from  all¬ 
sources  within  and  without  the  United 
States ; 

Taxes,  Paid  or  Accrued,  When  Allowed 
as  a  Credit. 

(3)  Taxes  paid  or  accrued  within  the  tax¬ 
able  year  imposed  (a)  by  the  authority  of 
the  United  States,  except  income,  war  prof¬ 
its  and  excess-profits  taxes;  or  (b)  by  the 
authority  of  any  of  its  possessions,  except 
the  amount  of  income,  war  profits  and  ex- 
cess-profits  taxes  allowed  as  a  credit  under 
section  222 ;  or  (c)  by  the  authority  of  any 

—  17  — 


State  or  Territory,  or  any  county,  school 
district,  municipality,  or  other  taxing  sub¬ 
division  of  any  State  or  Territory,  not  in¬ 
cluding  those  assessed  against  local  benefits 
of  a  kind  tending  to  increase  the  value  of 
the  property  assessed;  or  (d)  in  the  case  of 
a  citizen  or  resident  of  the  United  States,  by 
the  authority  of  any  foreign  country,  ex¬ 
cept  the  amount  of  income,  war-profits  and 
excess-profits  taxes  allowed  as  a  credit  un¬ 
der  section  222 ;  or  (e)  in  the  case  of  a  non¬ 
resident  alien  individual,  by  the  authority  of 
any  foreign  country  (except  income,  war- 
profits  and  excess-profits  taxes,  and  taxes 
assessed  against  local  benefits  of  a  kind 
tending  to  increase  the  value  of  the  prop¬ 
erty  assessed),  upon  property  or  business; 

Losses  Sustained. 

(4)  Losses  sustained  during  the  taxable 
year  and  not  compensated  for  by  insurance 
or  otherwise,  if  incurred  in  trade  or  busi¬ 
ness  ; 

(5)  Losses  sustained  during  the  taxable 
year  and  not  compensated  for  by  insurance 
or  otherwise,  if  incurred  in  any  transaction 
entered  into  for  profit,  though  not  connected 
with  the  trade  or  business;  but  in  the  case 
of  a  nonresident  alien  individual  only  as  to 
such  transactions  within  the  United  States; 

(6)  Losses  sustained  during  the  taxable 
year  of  property  not  connected  with  the 
trade  or  business  (but  in  the  case  of  a  non¬ 
resident  alien  individual  only  property  with¬ 
in  the  LTnited  States)  if  arising  from  fires, 
storms,  shipwreck,  or  other  casualty,  or 
from  theft,  and  if  not  compensated  for  by 
insurance  or  otherwise ; 

Worthless  Debts — Exhaustion,  Wear  and 

Tear. 

(7)  Debts  ascertained  to  be  worthless 
and  charged  off  within  the  taxable  year; 

(8)  A  reasonable  allowance  for  the  ex¬ 
haustion,  wear  and  tear  of  property  used  in 
the  trade  or  business,  including  a  reasonable 
allowance  for  obsolescence ; 

(9)  In  the  case  of  buildings,  machinery, 
equipment,  or  other  facilities,  constructed, 
erected,  installed,  or  acquired,  on  or  after 
April  6,  1917,  for  the  production  of  articles 

—  18  — 


contributing  to  the  prosecution  of  the 
present  war,  and  in  the  case  of  vessels  con¬ 
structed  or  acquired  on  or  after  such  date 
for  the  transportation  of  articles  or  men 
contributing  to  the  prosecution  of  the  pres¬ 
ent  war,  there  shall  be  allowed  a  reasonable 
deduction  for  the  amortization  of  such  part 
of  the  cost  of  such  facilities  or  vessels  as 
has  been  borne  by  the  taxpayer,  but  not 
again  including  any  amount  otherwise  al¬ 
lowed  under  this  title  or  previous  Acts  of 
Congress  as  a  deduction  in  computing  net 
income.  At  any  time  within  three  years 
after  the  termination  of  the  present  war 
the  Commissioner  may,  and  at  the  request 
of  the  taxpayer  shall,  reexamine  the  return, 
and  if  he  then  finds  as  a  result  of  an  ap¬ 
praisal  or  from  other  evidence  that  the  de¬ 
duction  originally  allowed  was  incorrect, 
the  taxes  imposed  by  this  title  and  by 
Title  III  for  the  year  or  years  affected  shall 
be  redetermined;  and  the  amount  of  tax  due 
upon  such  redetermination,  if  any,  shall  be 
paid  upon  notice  and  demand  by  the  col¬ 
lector,  or  the  amount  of  tax  overpaid,  if  an}-, 
shall  be  credited  or  refunded  to  the  taxpayer 
in  accordance  with  the  provisions  of  section 
252; 

(10)  In  the  case  of  mines,  oil  and  gas 
wells,  other  natural  deposits,  and  timber,  a 
reasonable  allowance  for  depletion  and  for 
depreciation  of  improvements,  according  to 
the  peculiar  conditions  in  each  case,  based 
upon  cost  including  cost  of  development  not 
otherwise  deducted :  Provided,  That  in  the 
case  of  such  properties  acquired  prior  to 
March  1,  1913,  the  fair  market  value  of  the 
property  (or  the  taxpayer’s  interest  therein) 
on  that  date  shall  be  taken  in  lieu  of  cost  up 
to  that  date :  Provided  further,  That  in  the 
case  of  mines,  oil  and  gas  wells,  discovered 
by  the  taxpayer,  on  or  after  March  1,  1913, 
and  not  acquired  as  the  result  of  purchase  of 
a  proven  tract  or  lease,  where  the  fair  mar¬ 
ket  value  of  the  property  is  materially  dis¬ 
proportionate  to  the  cost,  the  depletion  al¬ 
lowance  shall  be  based  upon  the  fair  market 
value  of  the  property  at  the  date  of  the  dis¬ 
covery,  or  within  thirty  days  thereafter; 
such  reasonable  allowance  in  all  the  above 
cases  to  be  made  under  rules  and  regula- 


—  19  — 


tions  to  be  prescribed  by  the  Commissioner 
with  the  approval  of  the  Secretary.  In  the 
case  of  leases  the  deductions  allowed  by  this 
paragraph  shall  be  equitably  apportioned 
between  the  lessor  and  lessee; 

Contributions  or  Gifts. 

(11)  Contributions  or  gifts  made  within 
the  taxable  year  to  corporations  organized 
and  operated  exclusively  for  religious,  char¬ 
itable,  scientific,  or  educational  purposes,  or 
for  the  prevention  of  cruelty  to  children  or 
animals,  no  part  of  the  net  earnings  of 
which  inures  to  the  benefit  of  any  private 
stockholder  or  individual,  or  to  the  special 
fund  for  vocational  rehabilitation  author¬ 
ized  by  section  7  of  the  Vocational  Rehabili¬ 
tation  Act,  to  an  amount  not  in  excess  of 
15  per  centum  of  the  taxpayer’s  net  income 
as  computed  without  the  benefit  of  this 
paragraph.  Such  contributions  or  gifts 
shall  be  allowable  as  deductions  only  if  veri¬ 
fied  under  rules  and  regulations  prescribed 
by  the  Commissioner,  with  the  approval  of 
the  Secretary.  In  the  case  of  a  nonresident 
alien  individual  this  deduction  shall  be  al¬ 
lowed  only  as  to  contributions  or  gifts  made 
to  domestic  corporations,  or  to  such  voca¬ 
tional  rehabilitation  fund ; 

Claim  in  Abatement. 

(12)  (a)  At  the  time  of  filing  return  for 
the  taxable  year  1918  a  taxpayer  may  file  a 
claim  in  abatement  based  on  the  fact  that 
he  has  sustained  a  substantial  loss  (whether 
or  not  actually  realized  by  sale  or  other 
disposition)  resulting  from  any  material 
reduction  (not  due  to  temporary  fluctation) 
of  the  value  of  the  inventory  for  such  tax¬ 
able  year,  or  from  the  actual  payment  after 
the  close  of  such  taxable  year  of  rebates  in 
pursuance  of  contracts  entered  into  during 
such  year  upon  sales  made  during  such  year. 
In  such  case  payment  of  the  amount  of  the 
tax  covered  by  such  claim  shall  not  be  re¬ 
quired  until  the  claim  is  decided,  but  the 
taxpayer  shall  accompany  his  claim  with  a 
bond  in  double  the  amount  of  the  tax 
covered  by  the  claim,  with  sureties  satis¬ 
factory  to  the  Commissioner,  conditioned 

—  20  — 


for  the  payment  of  any  part  of  such  tax 
found  to  be  due,  with  interest.  If  any  part 
of  such  claim  is  disallowed  then  the  re¬ 
mainder  of  the  tax  due  shall  on  notice  and 
demand  by  the  collector  be  paid  by  the 
taxpayer  with  interest  at  the  rate  of  1  per 
centum  per  month  from  the  time  the  tax 
would  have  been  due  had  no  such  claim 
been  filed.  If  it  is  shown  to  the  satisfaction 
of  the  Commissioner  that  such  substantial 
loss  has  been  sustained,  then  in  computing 
the  tax  imposed  by  this  title  the  amount  of 
such  loss  shall  be  deducted  from  the  net 
income,  (b)  If  no  such  claim  is  filed,  but 
it  is  shown  to  the  satisfaction  of  the  Com¬ 
missioner  that  during  the  taxable  year  1919 
the  taxpayer  has  sustained  a  substantial 
loss  of  the  character  above  described  then 
the  amount  of  such  loss  shall  be  deducted 
from  the  net  income  for  the  taxable  year 
1918  and  the  tax  imposed  by  this  title  for 
such  year  shall  be  redetermined  accordingly. 
Any  amount  found  to  be  ^due  to  the  tax¬ 
payer  upon  the  basis  of  such  redetermin¬ 
ation  shall  be  credited  or  refunded  to  the 
taxpayer  in  accordance  with  the  provisions 
of  section  252. 

Deductions  Not  Allowed  Nonresident 

Aliens. 

(b)  In  the  case  of  a  nonresident  alien 
individual  the  deduction  allowed  in  para- 
graphs  (1).  (4),  (7),  (8),  (9),  (10),  (12), 
and  clause  (e)  of  paragraph  (3),  of  sub¬ 
division  (a)  shall  be  allowed  only  if  and  to 
the  extent  that  they  are  connected  with 
income  arising  from  a  source  within  the 
United  States;  and  the  proper  apportion¬ 
ment  and  allocation  of  the  deductions  with 
respect  to  sources  of  income  within  and 
without  the  United  States  shall  be  deter¬ 
mined  under  rules  and  regulations  pre¬ 
scribed  by  the  Commissioner  with  the  ap¬ 
proval  of  the  Secretary. 

Items  Not  Deductible. 

Sec.  215.  That  in  computing  net  income 
no  deduction  shall  in  any  case  be  allowed  in 
respect  of — 


—  21  — 


(a)  Personal,  living,  or  family  expenses; 

(b)  Any  amount  paid  out  for  new  build¬ 
ings  or  for  permanent  improvements  or  bet¬ 
terments  made  to  increase  the  value  of  any 
property  or  state; 

(c)  Any  amount  expended  in  restoring 
property  or  in  making  good  the  exhaustion 
thereof  for  which  an  allowance  is  or  has 
been  made;  or 

(d)  Premiums  paid  on  any  life  insurance 
policy  covering  the  life  of  any  officer  or  em¬ 
ployee,  or  of  any  person  financially  inter¬ 
ested  in  any  trade  or  business  carried  on  by 
the  taxpayer,  when  the  taxpayer  is  directly 
or  indirectly  a  beneficiary  under  such  policy. 

Credits  Allowed. 

Sec.  216.  That  for  the  purpose  of  the  nor¬ 
mal  tax  only  there  shall  be  allowed  the  fol¬ 
lowing  credits : 

Amounts  Previously  Taxed. 

(a)  The  amount  received  as  dividends 
from  a  corporation  which  is  taxable  under 
this  title  upon  its  net  income,  and  amounts 
received  as  dividends  from  a  personal  serv¬ 
ice  corporation  out  of  earnings  or  profits 
upon  which  income  tax  has  been  imposed  by 
Act  of  Congress; 

Interest  on  Obligations  of  United  States. 

(b)  The  amount  received  as  interest  upon 
obligations  of  the  United  States  and  bonds 
issued  by  the  War  Finance  Corporation, 
which  is  included  in  gross  income  under  sec¬ 
tion  213 ; 

Specific  Personal  Exemptions. 

(c)  In  the  case  of  a  single  person,  a  per¬ 
sonal  exemption  of  $1,000,  or  in  the  case  of 
the  head  of  a  family  or  a  married  person  liv¬ 
ing  with  husband  or  wife,  a  personal  ex¬ 
emption  of  $2,000.  A  husband  and  wife  liv¬ 
ing  together  shall  receive  but  one  personal 
exemption  of  $2,000  against  their  aggregate 
net  income;  and  in  case  they  make  separate 
returns,  the  personal  exemption  of  $2,000 
may  be  taken  by  either  or  divided  between 
them : 

(d)  $200  for  each  person  (other  than 
husband  or  wife)  dependent  upon  and  re- 

—  22  — 


ceiving  his  chief  support  from  the  taxpayer, 
if  such  dependent  person  is  under  eighteen 
years  of  age  or  is  incapable  of  self-support 
because  mentally  or  physically  defective. 

Credits  to  Nonresident  Aliens,  Conditional. 

(e)  In  the  case  of  a  nonresident  alien  in¬ 
dividual  who  is  a  citizen  or  subject  of  a  coun¬ 
try  which  imposes  an  income  tax,  the  credits 
allowed  in  subdivisions  (c)  and  (d)  shall  be 
allowed  only  if  such  country  allows  a  simi¬ 
lar  credit  to  citizens  of  the  United  States 
not  residing  in  such  country. 

Nonresident  Aliens — Allowance  of  Deduc¬ 
tions  and  Credits. 

Sec.  217.  That  a  nonresident  alien  indi¬ 
vidual  shall  receive  the  benefit  of  the  de¬ 
ductions  and  credits  allowed  in  this  title 
only  by  filing  or  causing  to  be  filed  with  the 
collector  a  true  and  accurate  return  of  his 
total  income  received  from  all  sources  cor¬ 
porate  or  otherwise  in  the  United  States,  in 
t lie  manner  prescribed  by  this  title,  includ¬ 
ing  therein  all  the  information  which  the 
Commissioner  may  deem  necessary  for  the 
calculation  of  such  deductions  and  credits: 
Provided ,  That  the  benefit  of  the  credits  al¬ 
lowed  in  subdivisions  (c)  and  (d)  of  sec¬ 
tion  216  may,  in  the  discretion  of  the  Com¬ 
missioner,  and  except  as  otherwise  provided 
in  subdivision  (e)  of  that  section,  be  re¬ 
ceived  by  filing  a  claim  therefor  with  the 
withholding  agent.  In  case  of  failure  to 
file  a  return,  the  collector  shall  collect  the 
tax  on  such  income,  and  all  property  be- 
longng  to  such  nonresident  alien  individual 
shall  be  liable  to  distraint  for  the  tax. 

Partnerships  and  Personal  Service  Corpora¬ 
tions  Exempt  as  Such — Individ¬ 
ual  Liability. 

Sec.  218.  (a)  That  individuals  carrying 
on  business  in  partnership  shall  be  liable 
for  income  tax  only  in  their  individual  ca¬ 
pacity.  There  shall  be  included  in  comput¬ 
ing  the  net  income  of  each  partner  his  dis¬ 
tributive  share,  whether  distributed  or  not, 
of  the  net  income  of  the  partnership  for  the 
taxable  year,  or,  if  his  net  income  for  such 

—  23  — 


taxable  year  is  computed  upon  the  basis  of  a 
period  different  from  that  upon  the  basis  of 
which  the  net  income  of  the  partnership  is 
computed,  then  his  distributive  share  of  the 
net  income  of  the  partnership  for  any  ac¬ 
counting  period  of  the  partnership  ending 
within  the  fiscal  of  calendar  year  upon  the 
basis  of  which  the  partner’s  net  income  is 
computed. 

The  partner  shall,  for  the  purpose  of  the 
normal  tax,  be  allowed  as  credits,  in  addi¬ 
tion  to  the  credits  allowed  to  him  under  sec¬ 
tion  216,  his  proportionate  share  of  such 
amounts  specified  in  subdivisions  (a)  and 

(b)  of  section  216  as  are  received  by  the 
partnership. 

(b)  If  a  fiscal  year  of  a  partnership  ends 
during  a  calendar  year  for  which  the  rates 
of  tax  differ  from  those  for  the  preceding 
calendar  year,  then  (1)  the  rates  for  such 
preceding  calendar  year  shall  apply  to  an 
amount  of  each  partner’s  share  of  such  part¬ 
nership  net  income  equal  to  the  proportion 
which  the  part  of  such  fiscal  year  falling 
within  such  calendar  year  bears  to  the  full 
fiscal  year,  and  (2)  the  rates  for  the  calendar 
year  during  which  such  fiscal  year  ends 
shall  apply  to  the  remainder. 

(c)  In  the  case  of  an  individual  member 
of  a  partnership  which  makes  return  for  a 
fiscal  year  beginning  in  1917  and  ending  in 
1918,  his  proportionate  share  of  any  excess 
profits  tax  imposed  upon  the  partnership 
under  the  Revenue  Act  of  1917  with  respect 
to  that  part  of  such  fiscal  year  falling  in 
1917,  shall,  for  the  purpose  of  determining 
the  tax  imposed  by  this  title,  be  credited 
against  that  portion  of  the  net  income  em¬ 
braced  in  his  personal  return  for  the  taxa¬ 
ble  year  1918  to  which  the  rates  for  1917  ap- 

p'y- 

(d)  The  net  income  of  the  partnership 
shall  be  computed  in  the  same  manner  and 
on  the  same  basis  as  provided  in  section  212, 
except  that  the  deduction  provided  in  para¬ 
graph  (11)  of  subdivision  (a)  of  section  214 
shall  not  be  allowed. 

(e)  Personal  service  corporations  shall 
not  be  subject  to  taxation  under  this  title, 
but  the  individual  stockholders  thereof  shall 


—  24  — 


be  taxed  in  the  same  manner  as  the  mem¬ 
bers  of  partnerships.  All  the  provisions  of 
this  title  relating  to  partnerships  and  the 
members  thereof  shall  so  far  as  practicable 
apply  to  personal  service  corporations  and 
the  stockholders  thereof :  Provided,  That 
for  the  purpose  of  this  subdivision  amounts 
distributed  by  a  personal  service  corpora¬ 
tion  during  its  taxable  year  shall  be  ac¬ 
counted  for  by  the  distributees;  and  any 
portion  of  the  net  income  remaining  undis¬ 
tributed  at  the  close  of  its  taxable  year  shall 
be  accounted  for  by  the  stockholders  of 
such  corporation  at  the  close  of  its  taxable 
year  in  proportion  to  their  respective  shares. 

Estates  and  Trusts — Periodical  Distribu¬ 
tions — Income  for  Future  Distribution 
— Fiduciary  Responsibility. 

Sec.  219.  (a)  That  the  tax  imposed  by 
sections  210  and  211  shall  apply  to  the  in¬ 
come  of  estates  or  of  any  kind  of  property 
held  in  trust,  including — 

(1)  Income  received  by  estates  of  de¬ 
ceased  persons  during  the  period  of  admin¬ 
istration  or  settlement  of  the  estate ; 

(2)  Income  accumulated  in  trust  for  the 
benefit  of  unborn  or  unascertained  persons 
or  persons  with  contingent  interests ; 

(3)  Income  held  for  future  distribution 
under  the  terms  of  the  will  or  trust ;  and 

(4)  Income  which  is  to  be  distributed  to 
the  beneficiaries  periodically,  whether  or 
not  at  regular  intervals,  and  the  income  col¬ 
lected  by  a  guardian  of  an  infant  to  be  held 
or  distributed  as  the  court  may  direct. 

(b)  The  fiduciary  shall  be  responsible  for 
making  the  return  of  income  for  the  estate 
or  trust  for  which  he  acts.  The  net  income 
of  the  estate  or  trust  shall  be  computed  in 
the  same  manner  and  on  the  same  basis  as 
provided  in  section  212,  except  that  there 
shall  also  be  allowed  as  a  deduction  (in  lieu 
of  the  deduction  authorized  by  paragraph 
(11)  of  subdivision  (a)  of  section  214)  any 
part  of  the  gross  income  which,  pursuant  to 
the  terms  of  the  will  or  deed  creating  the 
trust,  is  during  the  taxable  year  paid  to  or 
permanently  set  aside  for  the  United  States, 
any  State,  Territory,  or  any  political  subdi- 

—  25  — 


vision  thereof,  or  the  District  of  Columbia, 
or  any  corporation  organized  and  operated 
exclusively  for  religious,  charitable,  scientif¬ 
ic,  or  eductional  purposes,  or  for  the  pre¬ 
vention  of  cruelty  to  children  or  animals,  no 
part  of  the  net  earnings  of  which  inures  to 
the  benefit  of  any  private  stockholder  or  in¬ 
dividual  ;  and  in  cases  under  paragraph  (4) 
of  subdivision  (a)  of  this  section  the  fidu¬ 
ciary  shall  include  in  the  return  a  statement 
of  each  beneficiary’s  distributive  share  of 
such  net  income,  whether  or  not  distributed 
before  the  close  of  the  taxable  year  for 
which  the  return  is  made. 

Deductions — Credits — Donations,  When 

Exempt. 

(c)  In  cases  under  paragraph  (1),  (2),  or 
(3)  of  subdivision  (a)  the  tax  shall  be  im¬ 
posed  upon  the  net  income  of  the  estate  or 
trust  and  shall  be  paid  by  the  fiduciary,  ex¬ 
cept  that  in  determining  the  ner  income  of 
the  estate  of  any  deceased  person  during  the 
period  of  administration  or  settlement  there 
may  be  deducted  the  amount  of  any  income 
properly  paid  or  credited  to  any  leg'atee, 
heir  or  other  beneficiary.  In  such  cases 
the  estate  or  trust  shall,  for  the  purpose  of 
the  normal  tax,  be  allowed  the  same  credits 
as  are  allowed  to  single  persons  under  sec¬ 
tion  216. 

(d)  In  cases  under  paragraph  (4)  of  sub¬ 
division  (a),  and  in  the  case  of  any  income 
of  an  estate  during  the  period  of  adminis¬ 
tration  or  settlement  permitted  by  subdi¬ 
vision  (c)  to  be  deducted  from  the  net  income 
upon  which  tax  is  to  be  paid  by  the  fidu¬ 
ciary,  the  tax  shall  not  be  paid  by  the  fidu¬ 
ciary,  but  there  shall  be  included  in  comput¬ 
ing  the  net  income  of  each  beneficiary  his 
distributive  share,  whether  distributed  or 
not,  of  the  net  income  of  the  estate  or  trust 
for  the  taxable  year,  or,  if  his  net  income  for 
such  taxable  year  is  computed  upon  the 
basis  of  a  period  different  from  that  upon  the 
basis  of  which  the  net  income  of  the  estate 
or  trust  is  computed,  then  his  distributive 
share  of  the  net  income  of  the  estate  or  trust 
for  any  accounting  period  of  such  estate  or 
trust  ending  within  the  fiscal  or  calendar 
year  upon  the  basis  of  which  such  bene- 

—  26  — 


ficiary’s  net  income  is  computed.  In  such 
cases  the  beneficiary  shall,  for  the  purpose 
of  the  normal  tax,  be  allowed  as  credits  in 
addition  to  the  credits  allowed  to  him  un¬ 
der  section  216,  his  proportionate  share  of 
such  amounts  specified  in  subdivisions  (a) 
and  (b)  of  section  216  as  are  received  by 
the  estate  or  trust. 

Profits  of  Corporations  Taxable  to 
Stockholders — When  Formed  to 
Evade  Tax. 

Sec.  220.  That  if  any  corporation,  how¬ 
ever  created  or  organized,  is  formed  or 
availed  of  for  the  purpose  of  preventing  the 
imposition  of  the  surtax  upon  its  stock¬ 
holders  or  members  through  the  medium  of 
permitting  its  gains  and  profits  to  accumu¬ 
late  instead  of  being  divided  or  distributed, 
such  corporation  shall  not  be  subject  to  the 
tax  imposed  by  section  230,  but  the  stock¬ 
holders  or  members  thereof  shall  be  subject 
to  taxation  under  this  title  in  the  same  man¬ 
ner  as  provided  in  subdivision  (e)  of  section 
218  in  the  case  *of  stockholders  of  a  personal 
service  corporation,  except  that  the  tax  im¬ 
posed  by  Title  III  shall  be  deducted  from 
the  net  income  of  the  corporation  before 
the  computation  of  the  proportionate  share 
of  each  stockholder  or  member.  The  fact 
that  any  corporation  is  a  mere  holding  com¬ 
pany,  or  that  the  gains  and  profits  are  per¬ 
mitted  to  accumulate  beyond  the  reasonable 
needs  of  the  business,  shall  be  prima  facie 
evidence  of  a  purpose  to  escape  the  surtax; 
but  the  fact  that  the  gains  and  profits  are 
in  any  case  permitted  to  accumulate  and  be¬ 
come  surplus  shall  not  be  construed  as  evi¬ 
dence  of  a  purpose  to  escape  the  tax  in  such 
case  unless  the  Commissioner  certifies  that 
in  his  opinion  such  accumulation  is  unrea¬ 
sonable  for  the  purposes  of  the.  business. 
When  requested  by  the  Commissioner,  or 
any  collector,  every  corporation  shall  for¬ 
ward  to  him  a  correct  statement  of  such 
gains  and  profits  and  the  names  and  ad¬ 
dresses  of  the  individuals  or  shareholders 
who  would  be  entitled  to  the  same  if  div¬ 
ided  or  distributed,  and  of  the  amounts  that 
would  be  payable  to  each. 

—  27  — 


Payment  of  Tax  at  Source. 

Deductions  Allowed — Claim  Filed. 

Sec.  221.  (a)  That  all  individuals,  cor¬ 

porations  and  partnerships,  in  whatever  ca¬ 
pacity  acting,  including  lessees  or  mort¬ 
gagors  of  real  or  personal  property,  fidu¬ 
ciaries,  employers,  and  all  officers  and  em¬ 
ployees  of  the  United  States,  having  the 
control,  receipt,  custody,  disposal,  or  pay¬ 
ment,  of  interest,  rent,  salaries,  wages,  pre¬ 
miums,  annuities,  compensations,  remuner¬ 
ations,  emoluments,  or  other  fixed  or  de¬ 
terminable  annual  or  periodical  gains,  prof¬ 
its,  and  income,  of  any  nonresident  alien  in¬ 
dividual  (other  than  income  received  as 
dividends  from  a  corporation  which  is  tax¬ 
able  under  this  title  upon  its  net  income) 
shall  (except  in  the  cases  provided  for  in 
subdivision  (b)  and  except  as  otherwise 
provided  in  regulations  prescribed  by  the 
Commissioner  under  section  217)  deduct 
and  withhold  from  such  annual  or  period¬ 
ical  gains,  profits,  and  income  a  tax  equal  to 
8  per  centum  thereof :  Provided,  That  the 
Commissioner  may  authorize  such  tax  to 
be  deducted  and  withheld  from  the  interest 
upon  any  securities  the  owners  of  which 
are  not  known  to  the  withholding  agent. 

(b)  In  any  case  where  bonds,  mortgages, 
or  deeds  of  trust,  or  other  similar  obliga¬ 
tions  of  a  corporation  contain  a  contract  or 
provision  by  which  the  obligor  agrees  to 
pay  any  portion  of  the  tax  imposed  by  this 
title  upon  the  obligee,  or  to  reimburse  the 
obligee  for  any  portion  of  the  tax,  or  to 
pay  the  interest  without  deduction  for  any 
tax  which  the  obligor  may  be  required  or 
permitted  to  pay  thereon  or  to  retain  there¬ 
from  under  any  law  of  the  United  States, 
the  obligor  shall  deduct  and  withhold  a  tax 
equal  to  2  per  centum  of  the  interest  upon 
such  bonds,  mortgages,  deeds  of  trust,  or 
other  obligations,  whether  such  interest  is 
payable  annually  or  at  shorter  or  longer  pe-  . 
riods  and  whether  payable  to  a  nonresident 
alien  individual  or  to  an  individual  citizen 
or  resident  of  the  United  States  or  to  a  part¬ 
nership  :  Provided,  That  the  Commissioner 
may  authorize  such  tax  to  be  deducted  and 
withheld  in  the  case  of  interest  upon  any 
such  bonds,  mortgages,  deeds  of  trust  or 

—  28  — 


other  obligations,  the  owners  of  which  are 
not  known  to  the  withholding  agent.  Such 
deduction  and  withholding  shall  not  be  re¬ 
quired  in  the  case  of  a  citizen  or  resident 
entitled  to  receive  such  interest,  if  he  files 
with  the  withholding  agent  on  or  before 
February  1,  a  signed  notice  in  writing 
claiming  the  benefit  of  the  credits  provided 
in  subdivisions  (c)  and  (d)  of  section  216; 
nor  in  the  case  of  a  nonresident  alien  indi¬ 
vidual  if  so  provided  for  in  regulations  pre¬ 
scribed  by  the  Commissioner  under  section 
217. 

Returns — Payment. 

(c)  Every  individual,  corporation,  or 
partnership  required  to  deduct  and  with¬ 
hold  any  tax  under  this  section  shall  make 
return  thereof  on  or  before  March  first  of 
each  year  and  shall  on  or  before  June  fif¬ 
teenth  pay  the  tax  to  the  official  of  the 
United  States  Government  authorized  to  re¬ 
ceive  it.  Every  such  individual,  corpora¬ 
tion,  or  partnership  is  hereby  made  liable 
for  such  tax  and  is  hereby  indemnified 
against  the  claims  and  demands  of  any  in¬ 
dividual,  corporation,  or  partnership  for  the 
amount  of  any  payments  made  in  accord¬ 
ance  with  the  provisions  of  this  section. 

(d)  Income  upon  which  any  tax  is  re¬ 
quired  to  be  withheld  at  the  source  under 
this  section  shall  be  included  in  the  return 
of  the  recipient  of  such  income,  but  any 
amount  of  tax  so  withheld  shall  be  credited 
against  the  amount  of  income  tax  as  com¬ 
puted  in  such  return. 

Payments  Not  Re-collectible  from  With¬ 
holding  Agent. 

(e)  If  any  tax  required  under  this  sec¬ 
tion  to  be  deducted  and  withheld  is  paid 
by  the  recipient  of  the  income,  it  shall  not 
be  re-collected  from  the  withholding  agent ; 
nor  in  cases  in  which  the  tax  is  so  paid 
shall  any  penalty  be  imposed  upon  or  col¬ 
lected  from  the  recipient  of  the  income  or 
the  withholding  agent  for  failure  to  return 
or  pay  the  same,  unless  such  failure  was 
fraudulent  and  for  the  purpose  of  evading 
payment. 


—  29  — 


Credit  for  Taxes. 

Sec.  222.  (a)  That  the  tax  computed  un¬ 
der  Part  II  of  this  title  shall  be  credited 
with : 

Citizens. 

(1)  In  the  case  of  a  citizen  of  the  United 
States,  the  amount  of  any  income,  war- 
profits  and  excess-profits  taxes  paid  during 
the  taxable  year  to  any  foreign  country, 
upon  income  derived  from  sources  therein, 
or  to  any  possession  of  the  United  States ; 
and 

(2)  In  the  case  of  a  resident  of  the  United 
States,  the  amount  of  any  such  taxes  paid 
during  the  taxable  year  to  any  possession 
of  the  United  States;  and 

Alien  Residents. 

(3)  In  the  case  of  an  alien  resident  of  the 
United  States  who  is  a  citizen  or  subject 
of  a  foreign  country,  the  amount  of  any 
such  taxes  during  the  taxable  year  to  such 
country,  upon  income  derived  from  sources 
therein,  if  such  country,  in  imposing  such 
taxes,  allows  a  similar  credit  to  citizens  of 
the  United  States  residing  in  such  country; 
and 

Members  of  Partnerships — Estates. 

(4)  In  the  case  of  any  such  individual 
who  is  a  member  of  a  partnership  or  a  bene¬ 
ficiary  of  an  estate  or  trust,  his  proportion¬ 
ate  share  of  such  taxes  of  the  partnership 
or  the  estate  or  trust  paid  during  the  taxable 
year  to  a  foreign  country  or  to  any  posses¬ 
sion  of  the  United  States,  as  the  case  may 
be. 

Credits — Differences  Arising — Penal  Bonds. 

(b)  If  accrued  taxes  when  paid  differ  from 
the  amounts  claimed  as  credits  by  the  tax¬ 
payer,  or  if  any  tax  paid  is  refunded  in 
whole  or  in  part,  the  taxpayer  shall  notify 
the  Commissioner  who  shall  redetermine 
the  amount  of  the  tax  due  under  Part  II 
of  this  title  for  the  year  or  years  affected, 
and  the  amount  of  tax  due  upon  such  re¬ 
determination,  if  any,  shall  be  paid  by  the 
taxpayer  upon  notice  and  demand  by  the 
collector,  or  the  amount  of  tax  overpaid,  if 

—  30  —  ’ 


any,  shall  be  credited  or  refunded  to  the 
taxpayer  in  accordance  with  the  provisions 
of  section  252.  In  the  case  of  such  a  tax 
accrued  but  not  paid,  the  Commissioner  as 
a  condition  precedent  to  the  allowance  of 
this  credit  may  require  the  taxpayer  to  give 
a  bond  with  sureties  satisfactory  to  and  to 
be  approved  by  the  Commissioner  in  such 
penal  sum  as  the  Commissioner  may  re¬ 
quire,  conditioned  for  the  payment  by  the 
taxpayer  of  any  amount  of  tax  found  due 
upon  any  such  redetermination ;  and  the 
bond  herein  prescribed  shall  contain  such 
further  conditions  as  the  Commissioner  may 
require. 

Satisfactory  Evidence. 

(c)  These  credits  shall  be  allowed  only  if 
the  taxpayer  furnishes  evidence  satisfactory 
to  the  Commissioner  showing  the  amount 
of  income  derived  from  sources  within  such 
foreign  country  or.  such  possession  of  the 
United  States,  and  all  other  information 
necessary  for  the  computation  of  such 
credits. 

Individual  Returns. 

Single  and  Married  Persons. 

Sec.  223.  That  every  individual  having  a 
net  income  for  the  taxable  year  of  $1,000  or 
over  if  single  or  if  married  and  not  living 
with  husband  or  wife,  or  of  $2,000  or  over 
if  married  and  living  with  husband  or  wife, 
shall  make  under  oath  a  return  stating  spe¬ 
cifically  the  items  of  his  gross  income  and 
the  deductions  and  credits  allowed  by  this 
title.  If  a  husband  and  wife  living  together 
have  an  aggregate  net  income  of  $2,000  or 
over,  each  shall  make  such  a  return  unless 
the  income  of  each  is  included  in  a  single 
joint  return. 

0 

Returns  by  Agent. 

If  the  taxpayer  is  unable  to  make  his  own 
return,  the  return  shall  be  made  by  a  duly  • 
authorized  agent  or  by  the  guardian  or 
other  person  charged  with  the  care  of  the 
person  or  property  of  such  taxpayer. 

Partnership  Returns. 

Sec.  224.  That  every  partnership  shall 
make  a  return  for  each  taxable  year,  stating 

—  31  - 


specifically  the  items  of  its  gross  income 
and  the  deductions  allowed  by  this  title,  and 
shall  include  in  the  return  the  names  and 
addresses  of  the  individuals  who  would  be 
entitled  to  share  in  the  net  income  if  distrib¬ 
uted  and  the  amount  of  the  distributive 
share  of  each  individual.  The  return  shall 
be  sworn  to  by  any  one  of  the  partners. 

Fiduciary  Returns. 

Sec.  225.  That  every  fiduciary  (except  re¬ 
ceivers  appointed  by  authority  of  law  in 
possession  of  part  only  of  the  property  of 
an  individual)  shall  make  under  oath  a  re¬ 
turn  for  the  individual,  estate  or  trust  for 
which  he  acts  (1)  if  the  net  income  of  such 
individual  is  $1,000  or  over  if. single  or  if 
married  and  not  living  with  husband  or 
wife,  or  $2,000  or  over  if  married  and  living 
with  husband  or  wife,  or  (2)  if  the  net  in¬ 
come  of  such  estate  or  trust  is  $1,000  or 
over  or  if  any  beneficiary  of  such  estate  or 
trust  is  a  nonresident  alien,  stating  specifi¬ 
cally  the  items  of  the  gross  income  and  the 
deductions  and  credits  allowed  by  this  title. 
Under  such  regulations  as  the  Commis¬ 
sioner  with  the  approval  of  the  Secretary 
may  prescribe,  a  return  made  by  one  of  two 
or  more  joint  fiduciaries  and  filed  in  the 
office  of  the  collector  of  the  district  where 
such  fiduciary  resides  shall  be  a  sufficient 
compliance  with  the  above  requirement. 
The  fiduciary  shall  make  oath  that  he  has 
sufficient  knowledge  of  the  affairs  of  such 
individual,  estate  or  trust  to  enable  him  to 
make  the  return,  and  that  the  same  is,  to 
the  best  of  his  knowledge  and  belief,  true 
and  correct. 

Fiduciaries  required  to  make  returns  un¬ 
der  this  Act  shall  be  subject  to  all  the  pro¬ 
visions  of  this  Act  which  apply  to  individ¬ 
uals. 


Returns  When  Accounting  Period 
Changed. 

Sec.  226.  That  if  a  taxpayer,  with  the  ap¬ 
proval  of  the  Commissioner,  changes  the 
basis  of  computing  net  income  from  fiscal 
year  to  calendar  year  a  separate  return  shall 
be  made  for  the  period  between  the  close 

—  32  — 


of  the  last  fiscal  year  for  which  return  was 
made  and  the  following  December  31.  If 
the  change  is  from  calendar  year  to  fiscal 
year,  a  separate  return  shall  be  made  for 
the  period  between  the  close  of  the  last 
calendar  year  for  wrhich  return  wras  made 
and  the  date  designated  as  the  close  of  the 
fiscal  year.  If  the  change  is  from  one  fiscal 
year  to  another  fiscal  year  a  separate  return 
shall  be  made  for  the  period  between  the 
close  of  the  former  fiscal  year  and  the  date 
designated  as  the  close  of  the  new  fiscal 
year  to  another  fiscal  year  a  separate  return 
for  income  tax  keeps  his  accounts  on  the 
basis  of  a  fiscal  year  he  shall  make  a  sepa¬ 
rate  return  for  the  period  between  the  be¬ 
ginning  of  the  calendar  year  in  which  such 
fiscal  year  ends  and  the  end  of  such  fiscal 
year. 


Basis  of  Computation. 

In  all  of  the  above  cases  the  net  income 
shall  be  computed  on  the  basis  of  such  pe¬ 
riod  for  which  separate  return  is  made,  and 
the  tax  shall  be  paid  thereon  at  the  rate  for 
the  calendar  year  in  which  such  period  is 
included ;  and  the  credits  provided  in  sub¬ 
divisions  (c)  and  (d)  of  section  216  shall 
be  reduced  respectively  to  amounts  which 
bear  the  same  ratio  to  the  full  credits  pro¬ 
vided  in  such  subdivisions  as  the  number  of 
months  in  such  period  bears  to  twelve 
months. 

Time  and  Place  for  Filing  Returns. 

Extensions  by  Commissioner. 

Sec.  22 7.  (a)  That  returns  shall  be  made 
on  or  before  the  fifteenth  day  of  the  third 
month  following  the  close  of  the  fiscal  year, 
or,  if  the  return  is  made  on  the  basis  of  the 
calendar  rear,  then  the  return  shall  be  made 
on  or  before  the  fifteenth  day  of  March.  The 
Commissioner  may  grant  a  reasonable  ex¬ 
tension  of  time  for  filing  returns  whenever 
in  his  judgment  good  cause  exists  and  shall 
keep  a  record  of  every  such  extension  and 
the  reason  therefor.  Except  in  the  case  of 
taxpayers  who  are  abroad,  no  such  exten¬ 
sion  shall  be  for  more  than  six  months. 


—33 


(b)  Returns  shall  be  made  to  the  collec¬ 
tor  for  the  district  in  which  is  located  the 
legal  residence  or  principal  place  of  busi¬ 
ness  of  the  person  making  the  return,  or,  if 
he  has  no  legal  residence  or  principal  place 
of  business  in  the  United  States,  then  to 
the  collector  at  Baltimore,  Maryland. 

Understatement  in  Returns. 

Appeal  from  Increased  Return. 

Sec.  228.  That  if  the  collector  or  deputy 
collecto'r  has  reason  to  believe  that  the 
amount  of  any  income  returned  is  under¬ 
stated,  he  shall  give  due  notice  to  the  tax¬ 
payer  making  the  return  to  show  cause  why 
the  amount  of  the  return  should  not  be  in¬ 
creased,  and  upon  proof  of  the  amount  un¬ 
derstated,  may  increase  the  same  accord¬ 
ingly.  Such  taxpayer  may  furnish  sworn 
testimony  to  prove  any  relevant  facts  and 
if  dissatisfied  with  the  decision  of  the  col¬ 
lector  may  appeal  to  the  Commissioner  for 
his  decision,  under  such  rules  of  procedure 
as  may  be  prescribed  by  the  Commissioner 
with  the  approval  of  the  Secretary. 

PART  III.— CORPORATIONS. 

Tax  on  Corporations. 

Sec.  230.  (a)  That,  in  lieu  of  the  taxes 
imposed  by  section  10  of  the  Revenue  Act 
of  1916,  as  amended  by  the  Revenue  Act 
of  1917,  and  by  section  4  of  the  Revenue  Act 
of  1917,  there  shall  be  levied,  collected,  and 
paid  for  each  taxable  year  upon  the  net  in¬ 
come  of  every  corporation  a  tax  at  the  fol¬ 
lowing  rates : 

Year  1918. 

(1)  For  the  calendar  year  1918,  12  per 
centum  of  the  amount  of  the  net  income  in 
excess  of  the  credits  provided  in  section 
236 ;  and 

Succeeding  Years. 

(2)  For  each  calendar  year  thereafter,  10 
per  centum  of  such  excess  amount. 

Transportation  Systems. 

(b)  For  the  purposes  of  the  Act  approved 
March  21,  1918,  entitled  “An  Act  to  pro- 


—34 


vide  for  the  operation  of  transportation 
systems  while  under  Federal  control,  for 
the  just  compensation  of  their  owners  and 
for  other  purposes,”  five-sixths  of  the  tax 
imposed  by  paragraph  (1)  of  subdivision 
(a)  and  four-fifths  of  the  tax  imposed  by 
paragraph  (2)  of  subdivision  (a)  shall  be 
treated  as  levied  by  an  Act  in  amendment 
of  Title  I  of  the  Revenue  Act  of  1917. 

Conditional  and  Other  Exemptions. 

Sec.  231.  That  the  following  organiza¬ 
tions  shall  be  exempt  from  taxation  under 

this  title — 

(1)  Labor,  agricultural,  or  horticultural 
organizations ; 

(2)  Mutual  savings  banks  not  having  a 
capital  stock  represented  by  shares ; 

\  • 

Fraternal  Beneficiary  Societies. 

(3)  Fraternal  beneficiary  societies,  orders, 
or  associations,  (a)  operating  under  the 
lodge  system  or  for  the  exclusive  benefit  of 
the  members  of  a  fraternity  itself  operating 
under  the  lodge  system,  and  (b)  providing 
for  the  payment  of  life,  sick,  accident,  or 
other  benefits  to  the  members  of  such  so¬ 
ciety,  order,  or  association  or  their  depend¬ 
ents  ; 

Building  and  Loan  Associations — 
Cooperative  Banks. 

(4)  Domestic  building  and  loan  associa¬ 
tions  and  cooperative  banks  without  capital 
stock  organized  and  operated  for  mutual 
purposes  and  without  profit; 

Cemetery  Companies. 

(5)  Cemetery  companies  owned  and  op¬ 
erated  exclusively  for  the  benefit  of  their 
members ; 

Religious,  Charitable,  Scientific,  Educa¬ 
tional  Corporations. 

(6)  Corporations  organized  and  operated 
exclusively  for  religious,  charitable,  scien¬ 
tific,  or  educational  purposes,  or  for  the 
prevention  of  cruelty  to  children  or  animals, 
no  part  of  the  net  earnings  of  which  inures 
to  the  benefit  of  any  private  stockholder 
or  individual ; 


Business  Leagues — Chambers  of  Commerce 
— Boards  of  Trade. 

(7)  Business  leagues,  chambers  of  com¬ 
merce,  or  boards  of  trade,  not  organized  for 
profit  and  no  part  of  the  net  earnings  of 
which  inures  to  the  benefit  of  any  private 
stockholder  or  individual ; 

(8)  Civic  leagues  or  organizations  not 
organized  for  profit  but  operated  exclusive¬ 
ly  for  the  promotion  of  social  welfare; 

Clubs. 

(9)  Clubs  organized  and  operated  exclu¬ 
sively  for  pleasure,  recreation,  and  other 
nonprofitable  purposes,  no  part  of  the  net 
earnings  of  which  inures  to  the  benefit  of 
any  private  stockholder  or  member; 

Mutual  Hail,  Cyclone,  Fire  Ins.  or  Other 
Like  Companies. 

(10)  Farmers’  or  other  mutual  hail,  cy¬ 
clone,  or  fire  insurance  companies,  mutual 
ditch  or  irrigation  companies,  mutual  or 
cooperative  telephone  companies,  or  like 
organizations  of  a  purely  local  character, 
the  income  of  which  consists  solely  of  as¬ 
sessments,  dues,  and  fees  collected  from 
members  for  the  sole  purpose  of  meeting 
expenses ; 

(11)  Farmers’,  fruit  growers’,  or  like  as¬ 
sociations,  organized  and  operated  as  sales 
agents  for  the  purpose  of  marketing  the 
products  of  members  and  turning  back  to 
them  the  proceeds  of  sales,  less  the  neces¬ 
sary  selling  expenses,  on  the  basis  of  the 
quantity  of  produce  furnished  by  them; 

Title  Holding  Companies  for  Exempt 
Corporations. 

(12)  Corporations  organized  for  the  ex¬ 
clusive  purpose  of  holding  title  to  property, 
collecting  income  therefrom,  and  turning 
oter  the  entire  amount  thereof,  less  ex¬ 
penses,  to  an  organization  which  itself  is 
exempt  from  the  tax  imposed  by  this  title ; 

Federal  Land  Banks — National  Farm  Loan 

Associations. 

(13)  Federal  land  banks  and  national 
farm-loan  associations  as  provided  in  sec- 

—36— 


tion  26  of  the  Act  approved  July  17,  1916, 
entitled  “An  Act  to  provide  capital  for  ag¬ 
ricultural  development,  to  create  standard 
forms  of  investment  based  upon  farm  mort¬ 
gage,  to  equalize  rates  of  interest  upon 
farm  loans,  to  furnish  a  market  for  United 
States  bonds,  to  create  Government  de¬ 
positaries  and  financial  agents  for  the 
United  States,  and  for  other  purposes”; 

(14)  Personal  service  corporations. 

Net  Income  Defined. 

Sec.  232.  That  in  the  case  of  a  corpora¬ 
tion  subject  to  the  tax  imposed  by  section 
230  the  term  “net  income”  means  the  gross 
income  as  defined  in  section  233  less  the 
deductions  allowed  by  section  234,  and  the 
net  income  shall  be  computed  on  the  same 
basis  as  is  provided  in  subdivision  (b)  of 
section  212  or  in  section  226. 

Gross  Income  Defined. 

Sec.  233.  (a)  That  in  the  case  of  a  cor¬ 
poration  subject  to  the  tax  imposed  by  sec¬ 
tion  230  the  term  “gross  income”  means  the 
gross  income  as  defined  in  section  213: 

Life  Insurance  Companies. 

(1)  In  the  case  of  life  insurance  com¬ 
panies  there  shall  not  be  included  in  gross 
income  such  portion  of  any  actual  premium 
received  from  any  individual  policyholder 
as  is  paid  back  or  credited  to  or  treated  as 
an  abatement  of  premium  of  such  policy¬ 
holder  within  the  taxable  year. 

(2)  Mutual  marine  insurance  companies 
shall  include  in  gross  income  the  gross  pre¬ 
miums  collected  and  received  by  them  less 
amounts  paid  for  reinsurance. 

Foreign  Corporations. 

(b)  In  the  case  of  a  foreign  corporation 
gross  income  includes  only  the  gross  income 
from  sources  within  the  United  States, 
including  the  interest  on  bonds,  notes, 
or  other  interest-bearing  obligations  of 
residents,  corporate  or  otherwise,  dividends 
from  resident  corporations,  and  including  all 
amounts  received  (although  paid  under  a 

—37— 


contract  for  the  sale  of  goods  or  otherwise) 
representing  profits  on  the  manufacture  and 
disposition  of  goods  within  the  United 
States. 


Deductions  Allowed. 

Sec.  234.  (a)  That  in  computing  the  net 
income  of  a  corporation  subject  to  the  tax 
imposed  by  section  230  there  shall  be  al¬ 
lowed  as  deductions: 

Expenses. 

(1)  All  the  ordinary  and  necessary  ex¬ 
penses  paid  or  incurred  during  the  taxable 
year  in  carrying  on  any  trade  or  business, 
including  a  reasonable  allowance  for  sal¬ 
aries  or  other  compensation  for  personal 
services  actually  rendered,  and  including 
rentals  or  other  payments  required  to  be 
made  as  a  condition  to  the  continued  use  or 
possession  of  property  to  which  the  cor¬ 
poration  has  not  taken  or  is  not  taking  title, 
or  in  which  it  has- no  equity; 

Interest. 

(2)  All  interest  paid  or  accrued  within 
the  taxable  year  on  its  indebtedness,  ex¬ 
cept  on  indebtedness  incurred  or  continued 
to  purchase  or  carry  obligations  or  secur¬ 
ities  (other  than  obligations  of  the  United 
States  issued  after  September  24,  1917)  the 
interest  upon  which  is  wholly  exempt  from 
taxation  under  this  title  as  income  to  the 
taxpayer,  or,  in  the  case  of  a  foreign  cor¬ 
poration,  the  proportion  of  such  interest 
which  the  amount  of  its  gross  income  from 
sources  within  the  United  States  bears  to 
the  amount  of  its  gross  income  from  all 
sources  within  and  without  the  United 
States ; 


Taxes — Exceptions. 

(3)  Taxes  paid  or  accrued  within  the 
taxable  year  imposed  (a)  by  the  authority 
of  the  United  States,  except  income,  war 
profits  and  excess-profits  taxes ;  or  (b)  by 
the  authority  of  any  of  its  possessions,  ex¬ 
cept  the  amount  of  income,  war  profits  and 
excess-profits  taxes  allowed  as  a  credit  un¬ 
der  section  238;  or  (c)  by  the  authority 

—38— 


of  any  State  or  Territory,  or  any  county, 
school  district,  municipality,  or  other  tax¬ 
ing  subdivision  of  any  State  or  Territory, 
not  including  those  assessed  against  local 
benefits  of  a  kind  tending  to  increase  the 
value  of  the  property  assessed ;  or  (d)  in 
the  case  of  a  domestic  corporation,  by  the 
authority  of  any  foreign  country,  except  the 
amount  of  income,  war-profits  and  excess- 
profits  taxes  allowed  as  a  credit  under  sec¬ 
tion  238;  or  (e)  in  the  case  of  a  foreign 
corporation,  by  the  authority  of  any  for¬ 
eign  country  (except  income,  war-profits 
and  excess-profits  taxes,  and  taxes  assessed 
against  local  benefits  of  a  kind  tending  to 
increase  the  value  of  the  property  assessed), 
upon  the  property  or  business :  Provided, 
That  in  the  case  of  obligors  specified  in  sub¬ 
division  (b)  of  section  221  no  deduction  for 
the  payment  of  the  tax  imposed  by  this 
title  or  any  other  tax  paid  pursuant  to  the 
contract  or  provision  referred  to  in  that  sub¬ 
division,  shall  be  allowed; 

Losses  Sustained — Worthless  Debts. 

(4)  Losses  sustained  during  the  taxable 
year  and  not  compensated  for  by  insurance 

or  otherwise; 

(5)  Debts  ascertained  to  be  worthless 
and  charged  ofif  within  the  taxable  year; 

Dividends  Previously  Taxed. 

(6)  Amounts  received  as  dividends  from 
a  corporation  which  is  taxable  under  this 
title  upon  its  net  income,  and  amounts  re¬ 
ceived  as  dividends  from  a  personal  service 
corporation  out  of  earnings  or  profits  upon 
which  income  tax  has  been  imposed  by  Act 
of  Congress ; 

Exhaustion,  Wear  and  Tear — Amortization. 

(7)  A  reasonable  allowance  for  the  exhaus¬ 
tion,  wear  and  tear  of  property  used  in  the 
trade  or  business,  including  a  reasonable 
allowance  for  obsolescence ; 

(8)  In  the  case  of  buildings,  machinery, 
equipment,  or  other  facilities,  constructed, 
erected,  installed,  or  acquired,  on  or  after 
April  6,  1917,  for  the  production  of  articles 
contributing  to  the  prosecution  of  the  pres¬ 
ent  war,  and  in  the  case  of  vessels  con- 


39— 


structed  or  acquired  on  or  after  such  date 
for  the  transportation  of  articles  or  men 
contributing  to  the  prosecution  of  the  pres¬ 
ent  war,  there  shall  be  allowed  a  reasonable 
deduction  for  the  amortization  of  such  part 
of  the  cost  of  such  facilities  or  vessels  as 
has  been  borne  by  the  taxpayer,  but  not 
again  including  any  amount  otherwise  al¬ 
lowed  under  this  title  or  previous  acts  of 
Congress  as  a  deduction  in  computing  net 
income.  At  any  time  within  three  years 
after  the  termination  of  the  present  war  the 
Commissioner  may,  and  at  the  request  of 
the  taxpayer  shall,  reexamine  the  return, 
and  if  he  then  finds  as  a  result  of  an  ap¬ 
praisal  oif  from  other  evidence  that  the  de¬ 
duction  originally  allowed  was  incorrect, 
the  taxes  imposed  by  this  title  and  by 
Title  III  for  the  year  or  years  affected  shall 
be  redetermined  and  the  amount  of  tax  due 
upon  such  redetermination,  if  any,  shall  be 
paid  upon  notice  and  demand  by  the  col¬ 
lector,  or  the  amount  of  tax  overpaid,  if 
any,  shall  be  credited  or  refunded  to  the  tax¬ 
payer  in  accordance  with  the  provisions  of 
section  252 ; 

Mines,  Oil  and  Gas  Wells. 

Depletion — Depreciation. 

(9)  In  the  case  of  mines,  oil  and  gas  wells, 
other  natural  deposits,  and  timber,  a  rea¬ 
sonable  allowance  for  depletion  and  for  de¬ 
preciation  of  improvements,  according  to 
the  peculiar  conditions  in  each  case,  based 
upon  cost  including  cost  of  development  not 
otherwise  deducted :  Provided,  That  in  the 
case  of  such  properties  acquired  prior  to 
March  1,  1913,  the  fair  market  value  of  the 
property  (or  the  taxpayer’s  interest  there¬ 
in)  on  that  date  shall  be  taken  in  lieu  of 
cost  up  to  that  date :  Provided  further,  That 
in  the  case  of  mines,  oil  and  gas  wells,  dis¬ 
covered  by  the  taxpayer,  on  or  after  March 
1,  1913,  and  not  acquired  as  the  result  of 
purchase  of  a  proven  tract  or  lease,  where 
the  fair  market  value  of  the  property  is  ma¬ 
terially  disproportionate  to  the  cost,  the  de¬ 
pletion  allowance  shall  be  based  upon  the 
fair  market  value  of  the  property  at  the 
date  of  the  discovery,  or  within  thirty  days 
thereafter;  such  reasonable  allowance  in  all 


40— 


the  above  cases  to  be  made  under  rules  and 
regulations  to  be  prescribed  by  the  Com¬ 
missioner  with  the  approval  of  the  Secre¬ 
tary.  In  the  case  of  leases  the  deductions 
allowed  by  this  paragraph  shall  be  equita¬ 
bly  apportioned  between  the  lessor  and 
lessee ; 

Insurance  Companies — Reserve  Funds 

(10)  In  the  case  of  insurance  companies, 
in  addition  to  the  above:  (a)  The  net  addi¬ 
tion  required  by  law  to  be  made  within  the 
taxable  year  to  reserve  funds  (including  in 
the  case  of  assessment  insurance  compa¬ 
nies  the  actual  deposit  of  sums  with  State  or 
Territorial  officers  pursuant  to  law  as  ad¬ 
ditions  to  guarantee  or  reserve  funds)  ;  and 
(b)  the  sums  other  than  dividends  paid 
within  the  taxable  year  on  policy  and  an¬ 
nuity  contracts; 

(11)  In  the  case  of  corporations  issuing 
policies  covering  life,  health,  and  accident 
insurance  combined  in  one  policy  issued  on 
the  weekly  premium  payment  plan  contin¬ 
uing  for  life  and  not  subject  to  cancellation, 
in  addition  to  the  above,  such  portion  of  the 
net  addition  (not  required  by  law)  made 
within  the  taxable  year  to  reserve  funds  as 
the  Commissioner  finds  to  be  required  for 
the  protection  of  the  holders  of  such  poli¬ 
cies  only ; 

Mutual  Marine  Insurance  Companies. 

(12)  In  the  case  of  mutual  marine  insur¬ 
ance  companies,  there  shall  be  allowed,  in 
addition  to  the  deductions  allowed  in  para¬ 
graphs  (1)  to  (10),  inclusive,  amounts  re¬ 
paid  to  policyholders  on  account  of  pre¬ 
miums  previously  paid  by  them,  and  inter¬ 
est  paid  upon  such  amounts  between  the 
ascertainment  and  the  payment  thereof; 

Other  Mutual  Insurance  Companies. 

(13)  In  the  case  of  mutual  insurance 
companies  (other  than  mutual  life  or  mu¬ 
tual  marine  insurance  companies)  requiring 
their  members  to  make  premium  deposits  to 
provide  for  losses  and  expenses,  there  shall 
be  allowed,  in  addition  to  the  deductions  al¬ 
lowed  in  paragraphs  (1)  to  (10),  inclusive, 

—41— 


(unless  otherwise  allowed  under  such  para¬ 
graphs)  the  amount  of  premium  deposits 
returned  to  their  policyholders  and  the 
amount  of  premium  deposits  retained  for 
the  payment  of  losses,  expenses,  and  rein¬ 
surance  reserves ; 

Losses — Claim  in  Abatement — Disallowance 

of  Claim. 

(14)  (a)  At  the  time  of  filing  return  for 
the  taxable  year  1918  a  taxpayer  may  file  a 
claim  in  abatement  based  on  the  fact  that 
he  has  sustained  a  substantial  loss  (wheth¬ 
er  or  not  actually  realized  by  sale  or  other 
disposition)  resulting  from  any  material  re¬ 
duction  (not  due  to  temporary  fluctuation) 
of  the  value  of  the  inventory  for  such  taxa¬ 
ble  year,  or  from  the  actual  payment  after 
the  close  of  such  taxable  year  of  rebates  in 
pursuance  of  contracts .  entered  into  during 
such  year  upon  sales  made  during  such  year. 
In  such  case  payment  of  the  amount  of  the 
tax  covered  by  such  claim  shall  not  be  re¬ 
quired  until  the  claim  is  decided,  but  the 
taxpayer  shall  accompany  his  claim  with  a 
bond  in  double  the  amount  of  the  tax  cov¬ 
ered  by  the  claim,  with  sureties  satisfactory 
to  the  Commissioner,  conditioned  for  the 
payment  of  any  part  of  such  tax  found  to  be 
due,  with  interest.  If  any  part  of  such  claim 
is  disallowed  then  the  remainder  of  the  tax 
due  shall  on  notice  and  demand  by  the  col¬ 
lector  be  paid  by  the  taxpayer  with  interest 
at  the  rate  of  1  per  centum  per  month  from 
the  time  the  tax  would  have  been  due  had  no 
such  claim  been  filed.  If  it  is  shown  to  the 
satisfaction  of  the  Commissioner  that  such 
substantial  loss  has  been  sustained,  then  in 
computing  the  taxes  imposed  by  this  title 
and  by  Title  III  the  amount  of  such  loss 
shall  be  deducted  from  the  net  income, 
(b)  If  no  such  claim  is  filed,  but  it  is  shown 
to  the  satisfaction  of  the  Commissioner  that 
during  the  taxable  year  1919  the  taxpayer 
has  sustained  a  substantial  loss  of  the  char¬ 
acter  above  described  then  the  amount  of 
such  loss  shall  be  deducted  from  the  net  in¬ 
come  for  the  taxable  year  1918  and  the  taxes 
imposed  by  this  title  and  by  Title  III  for 
such  year  shall  be  redetermined  according- 


42— 


ly.  Any  amount  found  to  be  due  to  the  tax¬ 
payer  upon  the  basis  of  such  redetermina¬ 
tion  shall  be  credited  or  refunded  to  the  tax¬ 
payer  in  accordance  with  the  provisions  of 

section  252. 

(b)  In  the  case  of  a  foreign  corporation 
the  deductions  allowed  in  subdivision  (a)r 
except  those  allowed  in  paragraph  (2)  and 
in  clauses  (a),  (b),  and  (c)  of  paragraph 
(3),  shall  be  allowed  only  if  and  to  the  ex¬ 
tent  that  they  are  connected  with  income 
arising  from  a  source  within  the  United 
States ;  and  the  proper  apportionment  and 
allocation  of  the  deductions  with  respect  to 
sources  of  income  within  and  without  the 
United  States  shall  be  determined  under 
rules  and  regulations  prescribed  by  the 
Commissioner  with  the  approval  of  the  Sec¬ 
retary. 


Items  Not  Deductible. 

Sec.  235.  That  in  computing  net  income 
no  deduction  shall  in  any  case  be  allowed 
in  respect  of  any  of  the  items  specified  in  sec¬ 
tion  215. 


Credits  Allowed. 

Sec.  236.  That  for  the  purpose  only  of 
the  tax  imposed  by  section  230  there  shall 
be  allowed  the  following  credits : 

Interest  on  U.  S.  Obligations. 

(a)  The  amount  received  as  interest  upon 
obligations  of  the  United  States  and  bonds 
issued  by  the  War  Finance  Corporation, 
which  is  included  in  gross  income  under  sec¬ 
tion  233 ; 


Other  Credits. 

(b)  The  amount  of  any  taxes  imposed  by 
Title  III  for  the  same  taxable  year:  Provid¬ 
ed,  That  in  the  case  of  a  corporation  which 
makes  return  for  a  fiscal  year  beginning  in 
1917  and  ending  in  1918,  in  computing 
the  tax  as  provided  in  subdivision  (a) 
of  section  205,  the  tax  computed  for  the 
entire  period  under  Title  II  of  the  Rev¬ 
enue  Act  of  1917  shall  be  credited 


against  the  net  income  computed  for  the  en¬ 
tire  period  under  Title  I  of  the  Revenue  Act 
of  1916  as  amended  by  the  Revenue  Act  of 
1917  and  under  Title  I  of  the  Revenue  Act  of 
1917,  and  the  tax  computed  for  the  entire 
period  under  Title  III  of  this  Act  at  the 
rates  prescribed  for  the  calendar  year  1918 
shall  be  credited  against  the  net  income 
computed  for  the  entire  period  under  this 
title ;  and 

Specific  Credit. 

(c)  In  the  case  of  a  domestic  corporation, 

$2,000. 

Payment  of  Tax  at  Source. 

Foreign  Corporations. 

Sec.  237.  That  in  the  case  of  foreign  cor¬ 
porations  subject  to  taxation  under  this  title 
not  engaged  in  trade  or  business  within  the 
United  States  and  not  having  any  office  or 
place  of  business  therein,  there  shall  be  de¬ 
ducted  and  withheld  at  the  source  in  the 
same  manner  and  upon  the  same  items  of 
income  as  is  provided  in  section  221  a  tax 
equal  to  10  per  centum  thereof,  and  such 
tax  shall  be  returned  and  paid  in  the  same 
manner  and  subject  to  the  same  conditions 
as  provided  in  that  section :  Provided, 
That  in  the  case  of  interest  described  in 
subdivision  (b)  of  that  section  the  deduc¬ 
tion  and  withholding  shall  be  at  the  rate  of 
2  per  centum. 

Credit  for  Taxes. 

Domestic  Corporation — Foreign  Payments. 

Sec.  238.  (a)  That  in  the  case  of  a  domes¬ 
tic  corporation  the  total  taxes  imposed  for 
the  taxable  year  by  this  title  and  by  Title 
III  shall  be  credited  with  the  amount  of  any 
income,  war-profits  and  excess-profits  taxes 
paid  during  the  taxable  year  to  any  foreign 
country,  upon  income  derived  from  sources 
therein,  or  to  any  possession  of  the  United 
States. 

If  accrued  taxes  when  paid  differ  from 
the  amounts  claimed  as  credits  by  the  cor¬ 
poration,  or  if  any  tax  paid  is  refunded  in 
whole  or  in  part,  the  corporation  shall  at 
once  notify  the  Commissioner  who  shall  re- 


44 


determine  the  amount  of  the  taxes  due  un¬ 
der  this  title  and  under  Title  III  for  the 
year  or  years  affected,  and  the  amount  of 
taxes  due  upon  such  redetermination,  if  any, 
shall  be  paid  by  the  corporation  upon  notice 
and  demand  by  the  collector,  or  the  amount 
of  taxes  overpaid,  if  any,  shall  be  credited  or 
refunded  to  the  corporation  in  accordance 
with  the  provisions  of  section  252.  In  the 
case  of  such  a  tax  accrued  but  not  paid,  the 
Commissioner  as  a  condition  precedent  to 
the  allowance  of  this  credit  may  require  the 
corporation  to  give  a  bond  with  sureties  sat¬ 
isfactory  to  and  to  be  approved  by  him  in 
such  penal  sum  as  he  may  require,  con¬ 
ditioned  for  the  payment  by  the  taxpayer  of 
any  amount  of  taxes  found  due  upon  any 
such  redetermination ;  and  the  bond  herein 
prescribed  shall  contain  such  further  condi¬ 
tions  as  the  Commissioner  may  require. 

Evidence  of  Payment. 

(b)  This  credit  shall  be  allowed  only  if 
the  taxpayer  furnishes  evidence  satisfac¬ 
tory  to  the  Commissioner  showing  the 
amount  of  income  derived  from  sources 
within  such  foreign  country  or  such  posses¬ 
sion  of  the  United  States,  as  the  case  may 
be,  and  all  other  information  necessary  for 
the  computation  of  such  credit. 

(c)  If  a  domestic  corporation  makes  a  re¬ 
turn  for  a  fiscal  year  beginning  in  1917  and 
ending  in  1918,  only  that  proportion  of  this 
credit  shall  be  allowed  which  the  part  of 
such  period  within  the  calendar  year  1918 
bears  to  the  entire  period. 

Corporation  Returns. 

Requirements  for  Trustees,  Receivers,  and 
Agents  for  Foreign  Corporations. 

Sec.  239.  That  every  corporation  subject 
to  taxation  under  this  title  and  every  per¬ 
sonal  service  corporation  shall  make  a  re¬ 
turn,  stating  specifically  the  items  of  its 
gross  income  and  the  deductions  and  credits 
allowed  by  this  title.  The  return  shall  be 
sworn  to  by  the  president,  vice  president,  or 


45— 


other  principal  officer  and  by  the  treasurer 
or  assistant  treasurer.  If  any  foreign  cor¬ 
poration  has  no  office  or  place  of  business  in 
the  United  States  but  has  an  agent  in  the 
United  States,  the  return  shall  be  made  by 
che  agent.  In  cases  where  receivers,  trus¬ 
tees  in  bankruptcy,  or  assignees  are  oper¬ 
ating  the  property  or  business  of  corpora^ 
tions,  such  receivers,  trustees,  or  assignees 
shall  make  returns  for  such  corporations  in 
the  same  manner  and  form  as  corporations 
are  required  to  make  returns.  Any  tax  due 
on  the  basis  of  such  returns  made  by  re¬ 
ceivers,  trustees,  or  assignees  shall  be  col¬ 
lected  in  the  same  manner  as  if  collected 
from  the  corporations  of  whose  business  or 
property  they  have  custody  and  control. 

Returns  made  under  this  section  shall  be 
subject  to  the  provisions  of  sections  226 
and  228. 

When  return  is  made  under  section  226 
the  credit  provided  in  subdivision  (c)  of  sec¬ 
tion  236  shall  be  reduced  to  an  amount 
which  bears  the  same  ratio  to  the  full  credit 
therein  provided  as  the  number  of  months 
in  the  period  for  which  such  return  is 
made  bears  to  twelve  months. 

Consolidated  Returns. 

How  Considered — Computed. 

Sec.  240.  (a)  That  corporations  which 
are  affiliated  within  the  meaning  of  this  sec¬ 
tion  shall,  under  regulations  to  be  pre¬ 
scribed  by  the  Commissioner  with  the  ap¬ 
proval  of  the  Secretary,  make  a  consolidated 
return  of  net  income  and  invested  capital  for 
the  purposes  of  this  title  and  Title  III,  and 
the  taxes  thereunder  shall  be  computed  and 
determined  upon  the  basis  of  such  return : 
Provided,  That  there  shall  be  taken  out  of 
such  consolidated  net  income  and  invested 
capital,  the  net  income  and  invested  capital 
of  any  such  affiliated  corporation  organized 
after  August  1,  1914,  and  not  successor  to  a 
then  existing  business,  50  per  centum  or 
more  of  whose  gross  income  consists  of 
gains,  profits,  commissions,  or  other  in¬ 
come,  derived  from  a  Government  contract 
or  contracts  made  between  April  6,  1917, 


and  November  11,  1918,  both  dates  inclusive. 
In  such  case  the  corporation  so  taken  out 
shall  be  separately  assessed  on  the  basis  of 
its  own  invested  capital  and  net  income  and 
the  remainder  of  such  affiliated  group  shall 
be  assessed  on  the  basis  of  the  remaining 
consolidated  invested  capital  and  net  in¬ 
come. 


Specific  Credits. 

In  anv  case  in  which  a  tax  is  assessed 
upon  the  basis  of  a  consolidated  return,  the 
total  tax  shall  be  computed  in  the  first  in¬ 
stance  as  a  unit  and  shall  then  be  assessed 
upon  the  respective  affiliated  corporations 
in  such  proportions  as  may  be  agreed  upon 
among  them,  or,  in  the  absence  of  any  such 
agreement,  then  on  the  basis  of  the  net  in¬ 
come  properly  assignable  to  each.  There 
shall  be  allowed  in  computing  the  income 
tax  only  one  specific  credit  of  $2,000  (as 
provided  in  section  236)  ;  in  computing  the 
war-profits  credit  (as  provided  in  section 
311)  only  one  specific  exemption  of  $3,000; 
and  in  computing  the  excess-profits  credit 
(as  provided  in  section  312)  only  one  spe¬ 
cific  exemption  of  $3,000. 

Corporations — When  Deemed  Affiliated. 

(b)  For  the  purpose  of  this  section  two 
or  more  domestic  corporations  shall  be 
deemed  to  be  affiliated  (1)  if  one  corpora¬ 
tion  owns  directly  or  controls  through 
closely  affiliated  interests  or  by  a  nominee 
or  nominees  substantially  all  the  stock  of 
the  other  or  others,  or  (2)  if  substantially  all 
the  stock  of  two  or  more  corporations  is 
owned  or  controlled  by  the  same  interests. 

Domestic  Corporation  Controlling  Foreign 

Corporation. 

(c)  For  the  purposes  of  section  238  a  do¬ 
mestic  corporation  which  owns  a  majority 
of  the  voting  stock  of  a  foreign  corporation 
shall  be  deemed  to  have  paid  the  same  pro¬ 
portion  of  any  income,  war-profits  and  ex¬ 
cess-profits  taxes  paid  (but  not  including 
taxes  accrued)  by  such  foreign  corporation 
during  the  taxable  year  to  any  foreign 
country  or  to  any  possession  of  the  United 


\7— 


States  upon  income  derived  from  sources 
without  the  United  States,  which  the 
amount  of  any  dividends  (not  deductible 
under  section  234)  received  by  such  domes¬ 
tic  corporation  from  such  foreign  corpora¬ 
tion  during  the  taxable  year  bears  to  the 
total  taxable  income  of  such  foreign  corpo¬ 
ration  upon  or  with  respect  to  which  such 
taxes  were  paid :  Provided,  That  in  no  such 
case  shall  the  amount  of  the  credit  for  such 
taxes  exceed  the  amount  of  such  dividends 
(not  deductible  under  section  234)  re¬ 
ceived  by  such  domestic  corporation  during 
the  taxable  year. 

Time  and  Place  for  Filing  Returns. 

Sec.  241.  (a)  That  returns  of  corporations 
shall  be  made  at  the  same  time  as  is  pro¬ 
vided  in  subdivision  (a)  of  section  227. 

(b)  Returns  shall  be  made  to  the  collec¬ 
tor  of  the  district  in  which  is  located  the 
principal  place  of  business  or  principal  of¬ 
fice  or  agency  of  the  corporation,  or,  if  it  has 
no  principal  place  of  business  or  principal 
office  or  agency  in  the  United  States,  then 
to  the  collector  at  Baltimore,  Maryland. 

Part  IV. — Administrative  Provisions. 

Payment  of  Taxes. 

Four  Installments — Extension  of  Time — 
Interest — Non-payment — Matures 
All  Installments. 

Sec.  250.  (a)  That  except  as  otherwise 
provided  in  this  section  and  sections  221 
and  237  the  tax  shall  be  paid  in  four  install¬ 
ments,  each  consisting  of  one-fourth  of  the 
total  amount  of  the  tax.  The  first  install 
merit  shall  be  paid  at  the  time  fixed  by  law 
for  filing  the  return,  and  the  second  install¬ 
ment  shall  be  paid  on  the  fifteenth  day  of 
the  third  month,  the  third  installment  on 
the  fifteenth  day  of  the  sixth  month,  and  the 
fourth  installment  on  the  fifteenth  day  of 
the  ninth  month,  after  the  time  fixed  by  law 
for  filing  the  return.  Where  an  extension 
of  time  for  filing  a  return  is  granted  the 
time  for  payment  of  the  first  installment 
shall  be  postponed  until  the  date  of  the  ex¬ 
piration  of  the  period  of  the  extension,  but 
the  time  for  payment  of  the  other  install- 


48— 


ments  shall  not  be  postponed  unless  the 
Commissioner  so  provides  in  granting  the 
extension.  In  any  case  in  which  the  time 
for  the  payment  of  any  installment  is  at 
the  request  of  the  taxpayer  thus  postponed 
there  shall  be  added  as  part  of  such  install¬ 
ment  interest  thereon  at  the  rate  of  3/2  of  1 
per  centum  per  month  from  the  time  it 
would  have  been  due  if  no  extension  had 
been  granted,  until  paid.  If  any  installment 
is  not  paid  when  due,  the  whole  amount  of 
the  tax  unpaid  shall  become  due  and  pay¬ 
able  upon  notice  and  demand  by  the  col¬ 
lector. 


One  Payment  Optional. 

The  tax  may  at  the  option  of  the  tax¬ 
payer  be  paid  in  a  single  payment  instead 
of  in  installments,  in  which  case  the  total 
amount  shall  be  paid  on  or  before  the  time 
fixed  by  law  for  filing  the  return,  or,  where 
an  extension  of  time  for  filing  the  return 
has  been  granted,  on  or  before  the  expira¬ 
tion  of  the  period  of  such  extension. 

Errors  in  Payments — Adjustments — 

Interest. 

(b)  As  soon  as  practicable  after  the  re¬ 
turn  is  filed,  the  Commissioner  shall  exam¬ 
ine  it.  If  it  then  appears  that  the  correct 
amount  of  the  tax  is  greater  or  less  than 
that  shown  in  the  return,  the  installments 
shall  be  recomputed.  If  the  amount  al¬ 
ready  paid  exceeds  that  which  should  have 
been  paid  on  the  basis  of  the  installments 
as  recomputed,  the  excess  so  paid  shall  be 
credited  against  the  subsequent  install¬ 
ments;  and  if  the  amount  already  paid  ex¬ 
ceeds  the  correct  amount  of  the  tax,  the 
excess  shall  be  credited  or  refunded  to  the 
taxpayer  in  accordance  with  the  provisions 
of  section  252. 

If  the  amount  already  paid  is  less  than 
that  which  should  have  been  paid,  the  dif¬ 
ference  shall,  to  the  extent  not  covered  by 
any  credits  then  due  to  the  taxpayer  under 
section  252,  be  paid  upon  notice  and  demand 
by  the  collector.  In  such  case  if  the  return 
is  made  in  good  faith  and  the  understate¬ 
ment  of  the  amount  in  the  return  is  not  due 
to  any  fault  of  the  taxpayer,  there  shall  be 


49 


no  penalty  because  ol  such  understatement. 
If  the  understatement  is  due  to  negligence 
on  the  part  of  the  taxpayer,  but  without  in¬ 
tent  to  defraud,  there  shall  be  added  as  part 
of  the  tax  5  per  centum  of  the  total  amount 
of  the  deficiency,  plus  interest  at  the  rate 
of  1  per  centum  per  month  on  the  amount 
of  the  deficiency  of  each  installment  from 
the  time  the  installment  was  due. 

Fraudulent  Statements. 

If  the  understatement  is  false  or  fraud¬ 
ulent  with  intent  to  evade  the  tax,  then, 
in  lieu  of  the  penalty  provided  by  section 
3176  of  the  Revised  Statutes,  as  amended, 
for  false  or  fraudulent  returns  willfully 
made,  but  in  addition  to  other  penalties  pro¬ 
vided  by  law  for  false  or  fraudulent  returns, 
there  shall  be  added  as  part  of  the  tax  50 
per  centum  of  the  amount  of  the  deficiency. 

(c)  If  the  return  is  made  pursuant  to  sec¬ 
tion  3176  of  the  Revised  Statutes  as 
amended,  the  amount  of  tax  determined  to 
be  due  under  such  return  shall  be  paid  upon 
notice  and  demand  by  the  collector. 

(d)  Except  in  the  case  of  false  or  fraud¬ 
ulent  returns  with  intent  to  evade  the  tax, 
the  amount  of  tax  due  under  any  return 
shall  be  determined  and  assessed  by  the 
Commissioner  within  five  years  after  the  re¬ 
turn  was  due  or  was  made,  and  no  suit  or 
proceeding  for  the  collection  of  any  tax 
shall  be  begun  after  the  expiration  of  five 
years  after  the  date  when  the  return- was 
due  or  was  made.  In  the  case  of  such 
false  or  fraudulent  returns,  the  amount  of 
tax  due  may  be  determined  at  any  time  after 
the  return  is  filed,  and  the  tax  may  be  col¬ 
lected  at  any  time  after  it  becomes  due. 

Additional  Tax  and  Interest  on  Unpaid 

Taxes. 

(e)  If  any  tax  remains  unpaid  after  the 
date  when  it  is  due,  and  for  ten  days  after 
notice  and  demand  by  the  collector,  then, 
except  in  the  case  of  estates  of  insane,  de¬ 
ceased,  or  insolvent  persons,  there  shall  be 
added  as  part  of  the  tax  the  sum  of  5  per 
centum  on  the  amount  due  but  unpaid,  plus 
interest  at  the  rate  of  1  per  centum  per 

—50— 


month  upon  such  amount  from  the  time  it 
became  due :  Provided ,  That  as  to  any 
such  amount  which  is  the  subject  of  a  bona 
fide  claim  for  abatement  such  sum  of  5  per 
centum  shall  not  be  added  and  the  interest 
from  the  time  the  amount  was  due  until  the 
claim  is  decided  shall  be  at  the  rate  of  of 
*  1  per  centum  per  month. 

Returns,  Sufficient  Notice. 

In  the  case  of  the  first  installment  pro¬ 
vided  for  in  subdivision  (a)  the  instructions 
printed  on  the  return  shall  be  deemed  suffi¬ 
cient  notice  of  the  date  when  the  tax  is 
due  and  sufficient  demand,  and  the  tax¬ 
payer's  computation  of  the  tax  on  the  re¬ 
turn  shall  be  deemed  sufficient  notice  of 
the  amount  due. 

Warrant  of  Distraint,  $5.00. 

(f)  In  any  case  in  which  in  order  to  en¬ 
force  payment  of  a  tax  it  is  necessary  for  a 
collector  to  cause  a  warrant  of  distraint  to 
be  served,  there  shall  also  be  added  as  part 
of  the  tax  the  sum  of  $5. 

Departure  or  Removal  From  United  States 
to  Avoid  Tax — Security  for 
Payment  of  Tax. 

(g)  If  the  Commissioner  finds  that  a  tax¬ 
payer  designs  quickly  to  depart  from  the 
United  States  or  to  remove  his  property 
therefrom,  or  to  conceal  himself  or  his  prop¬ 
erty  therein,  or  to  do  any  other  act  tend¬ 
ing  to  prejudice  or  to  render  wholly  or  part¬ 
ly  ineffectual  proceedings  to  collect  the  tax 
for  the  taxable  year  then  last  past  or  the 
taxable  year  then  current  unless  such  pro¬ 
ceedings  be  brought  without  delay,  the 
Commissioner  shall  declare  the  taxable  pe¬ 
riod  for  such  taxpayer  terminated  at  the  end 
of  the  calendar  month  then  last  past  and 
shall  cause  notice  of  such  finding  and  decla¬ 
ration  to  be  given  the  taxpayer,  together 
with  a  demand  for  immediate  payment  of 
the  tax  for  the  taxable  period  so  declared 
terminated  and  of  the  tax  for  the  preceding 
taxable  year  or  so  much  of  said  tax  as  is  un¬ 
paid,  whether  or  not  the  time  otherwise  al¬ 
lowed  by  law  for  filing  return  and  paying 
the  tax  has  expired ;  and  such  taxes  shall 

Pi  • 

— 51 — 


thereupon  become  immediately  due  and 
payable.  In  any  action  or  suit  brought  to 
enforce  payment  of  taxes  made  due  and 
payable  by  virtue  of  the  provisions  of  this 
subdivision  the  finding  of  the  Commis¬ 
sioner,  made  as  herein  provided,  whether 
made  after  notice  to  the  taxpayer  or  not, 
shall  be  for  all  purposes  presumptive  evi¬ 
dence  of  the  taxpayer’s  design.  A  tax¬ 
payer  who  is  not  in  default  in  making  any 
return  or  paying  income,  war  profits,  or  ex¬ 
cess-profits  tax  under  any  Act  of  Congress 
may  furnish  to  the  United  States,  under 
regulations  to  be  prescribed  by  the  Com¬ 
missioner  with  the  approval  of  the  Secre¬ 
tary,  security  approved  by  the  Commis¬ 
sioner  that  he  will  duly  make  the  return 
next  thereafter  required  to  be  filed  and  pay 
the  tax  next  thereafter  required  to  be  paid. 
The  Commissioner  may  approve  and  accept 
in  like  manner  security  for  return  and  pay¬ 
ment  of  taxes  made  due  and  payable  by  vir¬ 
tue  of  the  provisions  of  this  subdivision, 
provided  the  taxpayer  has  paid  in  full  all 
other  income,  war  profits,  or  excess-profits 
taxes  due  from  him  under  any  Act  of  Con¬ 
gress.  If  security  is  approved  and  accepted 
pursuant  to  the  provisions  of  this  subdivi¬ 
sion  and  such  further  or  other  security  with 
respect  to  the  tax  or  taxes  covered  thereby 
is  given  as  the  Commissioner  shall  from 
time  to  time  find  necessary  and  require,  pay¬ 
ment  of  such  taxes  shall  not  be  enforced  by 
any  proceedings  under  the  provisions  of 
this  subdivision  prior  to  the  expiration  of 
the  time  otherwise  allowed  for  paying  such 
respective  taxes. 

Receipts  for  Taxes. 

Sec.  251.  That  every  collector  to  whom 
any  payment  of  any  tax  is  made  under  the 
provisions  of  this  title  shall  upon  request 
give  to  the  person  making  such  payment  a 
full  written  or  printed  receipt,  stating  the 
amount  paid  and  the  particular  account  for 
which  such  payment  was  made;  and  when¬ 
ever  any  debtor  pays  taxes  on  account  of 
payments  made  or  to  be  made  by  him  to 
separate  creditors  the  collector  shall,  if  re¬ 
quested  by  such  debtor,  give  a  separate  re- 

--52— 


ceipt  for  the  tax  paid  on  account  of  each 
creditor  in  such  form  that  the  debtor  can 
conveniently  produce  such  receipts  sep¬ 
arately  to  his  several  creditors  in  satisfac¬ 
tion  of  their  respective  demands  up  to  the 
amounts  stated  in  the  receipts;  and  such  re¬ 
ceipt  shall  be  sufficient  evidence  in  favor  of 
such  debtor  to  justify  him  in  withholding 
from  his  next  payment  to  his  creditor  the 
amount  therein  stated ;  but  the  creditor 
may,  upon  giving  to  his  debtor  a  full  writ¬ 
ten  receipt  acknowledging  the  payment  to 
him  of  any  sum  actually  paid  and  accepting 
the  amount  of  tax  paid  as  aforesaid  (speci¬ 
fying  the  same)  as  a  further  satisfaction  of 
the  debt  to  that  amount,  require  the  sur¬ 
render  to  him  of  such  collector’s  receipt. 

Refunds. 

Sec.  252.  That  if,  upon  examination  of  any 
return  of  income  made  pursuant  to  this 
Act,  the  Act  of  August  5,  1909,  entitled  “An 
Act  to  provide  revenue,  equalize  duties,  and 
encourage  the  industries  of  the  United 
States,  and  for  other  purposes,”  the  Act  of 
October  3,  1913,  entitled  “An  Act  to  re¬ 
duce  tariff  duties  and  to  provide  revenue  for 
the  Government,  and  for  other  purposes,” 
the  Revenue  Act  of  1916,  as  amended,  or  the 
Revenue  Act  of  1917,  it  appears  that  an 
amount  of  income,  war  profits  or  excess- 
profits  tax  has  been  paid  in  excess  of  that 
properly  due,  then,  notwithstanding  the  pro¬ 
visions  of  section  3228  of  the  Revised  Stat¬ 
utes,  the  amount  of  the  excess  shall  be 
credited  against  any  income,  war  profits  or 
excess-profits  taxes,  or  installment  thereof, 
then  due  from  the  taxpayer  under  any  other 
return,  and  any  balance  of  such  excess 
shall  be  immediately  refunded  to  the  tax¬ 
payer  :  Provided ,  That  no  such  credit  or  re¬ 
fund  shall  be  allowed  or  made  after  five 
years  from  the  date  when  the  return  was 
due,  unless  before  the  expiration  of  such 
five  years  a  claim  therefor  is  filed  by  the 
taxpayer. 

Penalties. 

Sec.  253.  That  any  individual,  corpora¬ 
tion,  or  partnership  required  under  this 

—53— 


title  to  pay  or  collect  any  tax,  to  make  a  re¬ 
turn  or  to  supply  information,  who  fails  to 
pay  or  collect  such  tax,  to  make  such  re¬ 
turn,  or  to  supply  such  information  at  the 
time  or  times  required  under  this  title,  shall 
be  liable  to  a  penalty  of  not  more  than  $1,- 
000.  Any  individual,  corporation,  or  part¬ 
nership,  or  any  officer  or  employee  of  any 
corporation  or  member  or  employee  of  a 
partnership,  who  willfully  refuses  to  pay  or 
collect  such  tax,  to  make  such  return,  or  to 
supply  such  information  at  the  time  or 
times  required  under  this  title,  or  who  will¬ 
fully  attempts  in  any  manner  to  defeat  or 
evade  the'  tax  imposed  by  this  title,  shall  be 
guilty  of  a  misdemeanor  and  shall  be  fined 
not  more  than  $10,000  or  imprisoned  for  not 
more  than  one  year,  or  both,  together  with 
the  costs  of  prosecution. 

Returns  of  Payments  of  Dividends. 

Sec.  254.  That  every  corporation  subject 
to  the  tax  imposed  by  this  title  and  every 
personal  service  corporation  shall,  when  re¬ 
quired  by  the  Commissioner,  render  a  cor¬ 
rect  return  duly  verified  under  oath,  of  its 
payments  of  dividends,  stating  the  name 
and  address  of  each  stockholder,  the  num¬ 
ber  of  shares  owned  by  him,  and  the 
amount  of  dividends  paid  to  him. 

Returns  of  Brokers. 

List  of  Customers  and  Transactions. 

Sec.  255.  That  every  individual,  corpora¬ 
tion,  or  partnership  doing  business  as  a 
broker  shall,  when  required  by  the  Com¬ 
missioner,  render  a  correct  return  duly  veri¬ 
fied  under  oath,  under  such  rules  and  regu¬ 
lations  as  the  Commissioner,  with  the  ap¬ 
proval  of  the  Secretary,  may  prescribe, 
showing  the  names  of  customers  for  whom 
such  individual,  corporation,  or  partnership 
has  transacted  any  business,  with  such  de¬ 
tails  as  to  the  profits,  losses,  or  other  in¬ 
formation  which  the  Commissioner  may  re¬ 
quire,  as  to  each  of  such  customers,  as  will 
enable  the  Commissioner  to  determine 
whether  all  income  tax  due  on  profits  or 
gains  of  such  customers  has  been  paid. 


—54 


Information  at  Source. 

Sec.  256.  That  all  individuals,  corpora¬ 
tions,  and  partnerships,  in  whatever  capacity 
acting,  including  lessees  or  mortgagors  of 
real  or  personal  property,  fiduciaries,  and 
employers,  making  payment  to  another  in¬ 
dividual,  corporation,  or  partnership,  of  in¬ 
terest,  rent,  salaries,  wages,  premiums,  an¬ 
nuities,  compensations,  remunerations, 
emoluments,  or  other  fixed  or  determinable 
gains,  profits,  and  income  (other  than  pay¬ 
ments  described  in  sections  254  and  255),  of 
SI. 000  or  more  in  any  taxable  year,  or,  in  the 
case  of  such  payments  made  by  the  United 
States,  the  officers  or  employees  of  the 
United  States  having  information  as  to 
such  payments  and  required  to  make  re¬ 
turns  in  regard  thereto  by  the  regulations 
hereinafter  provided  for,  shall  render  a  true 
and  accurate  return  to  the  Commissioner, 
under  such  regulations  and  in  such  form 
and  manner  and  to  such  extent  as  may  be 
prescribed  by  him  with  the  approval  of  the 
Secretary,  setting  forth  the  amount  of  such 
gains,  profits,  and  income,  and  the  name 
and  address  of  the  recipient  of  such  pay¬ 
ment. 

Interest  on  Obligations  of  Foreign 
Corporations. 

Such  returns  may  be  required,  regardless 
of  amounts,  (1)  in  the  case  of  payments  of 
interest  upon  bonds,  mortgages,  deeds  of 
trust,  or  other  similar  obligations  of  cor¬ 
porations,  and  (2)  in  the  case  of  collections 
of  items  (not  payable  in  the  United  States) 
of  interest  upon  the  bonds  of  foreign  coun¬ 
tries  and  interest  upon  the  bonds  of  and 
dividends  from  foreign  corporations  by  in¬ 
dividuals,  corporations,  or  partnerships, 
undertaking  as  a  matter  of  business  or  for 
profit  the  collection  of  foreign  payments  of 
such  interest  or  dividends  by  means  of  cou¬ 
pons,  checks,  or  bills  of  exchange. 

When  necessary  to  make  effective  the 
provisions  of  this  section  the  name  and  ad- 

—55— 


dress  of  the  recipient  of  income  shall  be 
furnished  upon  demand  of  the  individual, 
corporation,  or  partnership  paying  the  in¬ 
come. 

The  provisions  of  this  section  shall  apply 
to  the  calendar  year  1918  and  each  calendar 
year  thereafter,  but  shall  not  apply  to  the 
payment  of  interest  on  obligations  of  the 
United  States. 

Returns  to  Be  Public  Records. 

Open  Only  on  Presidential  Order — Returns 
Accessible  to  Stockholders — Penalty 
for  Disclosure. 

Sec.  257.  That  returns  upon  which  the 
tax  has  been  determined  by  the  Commis¬ 
sioner  shall  constitute  public  records ;  but 
they  shall  be  open  to  inspection  only  upon 
order  of  the  President  and  under  rules  and 
regulations  prescribed  by  the  Secretary 
and  approved  by  the  President :  Provided, 
That  the  proper  officers  of  any  State  impos¬ 
ing  an  income  tax  may,  upon  the  request  of 
the  governor  thereof,  have  access  to  the  re¬ 
turns  of  any  corporation,  or  to  an  abstract 
thereof  showing  the  name  and  income  of  the 
corporation,  at  such  times  and  in  such  man¬ 
ner  as  the  Secretary  may  prescribe :  Pro¬ 
vided  further ,  That  all  bona  fide  stockhold¬ 
ers  of  record  owning  1  per  centum  or  more 
of  the  outstanding  stock  of  any  corporation 
shall,  upon  making  request  of  the  Commis¬ 
sioner,  be  allowed  to  examine  the  annual  in¬ 
come  returns  of  such  corporation  and  of  its 
subsidiaries.  Any  stockholder  who  pur¬ 
suant  to  the  provisions  of  this  section  is  al¬ 
lowed  to  examine  the  return  of  any  corpo¬ 
ration,  and  who  makes  known  in  any  man¬ 
ner  whatever  not  provided  by  law  the 
amount  or  source  of  income,  profits,  losses, 
expenditures,  or  any  particular  thereof,  set 
forth  or  disclosed  in  any  such  return,  shall 
be  guilty  of  a  misdemeanor  and  be  pun¬ 
ished  by  a  fine  not  exceeding  $1,000,  or  by 
imprisonment  not  exceeding  one  year,  or 
both. 


—56— 


List  of  Income-Taxpayers  Available. 

The  Commissioner  shall  as  soon  as  prac¬ 
ticable  in  each  year  cause  to  be  prepared 
and  made  available  to  public  inspection  in 
such  manner  as  he  may  determine,  in  the 
office  of  the  collector  in  each  internal-rev- 
I  enue  district  and  in  such  other  places  as  he 
may  determine,  lists  containing  the  names 
I  and  the  post-office  addresses  of  all  individ¬ 
uals  making  income-tax  returns  in  such  dis¬ 
trict. 


Publication  of  Statistics,  Annually. 

Sec.  258.  That  the  Commissioner,  with 
the  approval  of  the  Secretary,  shall  prepare 
:  and  publish  annually  statistics  reasonably 
available  with  respect  to  the  operation  of 
the  income,  war  profits  and  excess-profits 
tax  laws,  including  classifications  of  tax- 
j  payers  and  of  income,  the  amounts  allowed 
as  deductions,  exemptions,  and  credits,  and 
any  other  facts  deemed  pertinent  and  valu¬ 
able. 


Collection  of  Foreign  Items. 

License  Necessary. 

Sec.  259.  That  all  individuals,  corpora¬ 
tions,  or  partnerships  undertaking  as  a  mat¬ 
ter  of  business  or  for  profit  the  collection  of 
foreign  payments  of  interest  or  dividends 
by  means  of  coupons,  checks,  or  bills  of  ex¬ 
change  shall  obtain  a  license  from  the  Com¬ 
missioner  and  shall  be  subject  to  such  regu¬ 
lations  enabling  the  Government  to  obtain 
the  information  required  under  this  title  as 
the  Commissioner,  with  the  approval  of  the 
Secretary,  shall  prescribe;  and  whoever 
knowingly  undertakes  to  collect  such  pay¬ 
ments  without  having  obtained  a  license 
therefor,  or  without  complying  with  such 
regulations,  shall  be  guilty  of  a  misdemeanor 
and  shall  be  fined  not  more  than  $5,000,  or 
imprisoned  for  not  more  than  one  year,  or 
both. 

* 

Citizens  of  United  States  Possessions. 

Tax  on  Income  from  United  States. 

Sec.  260.  That  any  individual  who  is  a 
citizen  of  any  possession  of  the  United 

—57— 


States  (but  not  otherwise  a  citizen  of  the 
United  States)  and  who  is  not  a  resident  of 
the  United  States,  shall  be  subject  to  taxa¬ 
tion  under  this  title  only  as  to  income  de¬ 
rived  from  sources  within  the  United 
States,  and  in  such  case  the  tax  shall  be 
computed  and  paid  in  the  same  manner  and 
subject  to  the  same  conditions  as  in  the  case 
of  other  persons  who  are  taxable  only  as  to 
income  derived  from  such  sources. 

Porto  Rico  and  Philippine  Islands. 

Sec.  261.  That  in  Porto  Rico  and  the 
Philippine  Islands  the  income  tax  shall  be 
levied,  assessed,  collected,  and  paid  in  ac¬ 
cordance  with  the  provisions  of  the  Rev¬ 
enue  Act  of  1916  as  amended. 

Returns  shall  be  made  and  taxes  shall  be 
paid  under  Title  I  of  such  Act  in  Porto  Rico 
or  the  Philippine  Islands,  as  the  case  may 
be,  by  (1)  every  individual  who  is  a  citizen 
or  resident  of  Porto  Rico  or  the  Philippine 
Islands  or  derives  income  from  sources 
therein,  and  (2)  every  corporation  created 
or  organized  in  Porto  Rico  or  the  Philip¬ 
pine  Islands  or  deriving  income  from  sources 
therein.  An  individual  who  is  neither  a  cit¬ 
izen  nor  a  resident  of  Porto  Rico  or  the 
Philippine  Islands  but  derives  income  from 
sources  therein,  shall  be  taxed  in  Porto  Rico 
or  the  Philippine  Islands  as  a  nonresident 
alien  individual,  and  a  corporation  created 
or  organized  outside  Porto  Rico  or  the 
Philippine  Islands  and  deriving  income  from 
sources  therein  shall  be  taxed  in  Porto  Rico 
or  the  Philippine  Islands  as  a  foreign  cor¬ 
poration.  For  the  purposes  of  section  216 
and  of  paragraph  (6)  of  subdivision  (a)  of 
section  234  a  tax  imposed  in  Porto  Rico  or 
the  Philippine  Islands  upon  the  net  income 
of  a  corporation  shall  not  be  deemed  to  be 
a  tax  under  this  title. 

The  Porto  Rican  or  Philippine  Legisla¬ 
ture  shall  have  power  by  due  enactment  to 
amend,  alter,  modify,  or  repeal  the  income 
tax  laws  in  force  in  Porto  Rico  or  the  Philip¬ 
pine  Islands,  respectively. 

—58— 


TITLE  III.— WAR-PROFITS  AND 
EXCESS-PROFITS  TAX. 

Part  I. — General  Definitions. 

Sec.  300.  That  when  used  in  this  title  the 
terms  “taxable  year,”  ‘‘fiscal  year,”  “per¬ 
sonal  service  corporation,”  “paid  or  ac¬ 
crued”  and  “dividends”  shall  have  the  same 
meaning  as  provided  for  the  purposes  of  in¬ 
come  tax  in  sections  200  and  201.  The  first 
taxable  year  for  the  purposes  of  this  title 
shall  be  the  same  as  the  first  taxable  year 
for  the  purposes  of  the  income  tax  under 
Title  II. 

Part  II. — Imposition  of  Tax. 

Rates  Year  1918. 

Sec.  301.  (a)  That  in  lieu  of  the  tax  im¬ 
posed  by  Title  II  of  the  Revenue  Act  of 
1917,  but  in  addition  to  the  other  taxes  im¬ 
posed  by  this  Act,  there  shall  be  levied,  col¬ 
lected,  and  paid  for  the  taxable  year  1918 
upon  the  net  income  of  every  corporation  a 
tax  equal  to  the  sum  of  the  following: 

First  Bracket. 

30  per  centum  of  the  amount  of  the  net 
income  in  excess  of  the  excess-profits  credit 
(determined  under  section  312)  and  not  in 
excess  of  20  per  centum  of  the  invested 

capital ; 

Second  Bracket. 

65  per  centum  of  the  amount  of  the  net 
income  in  excess  of  20  per  centum  of  the 
invested  capital; 

Third  Bracket. 

The  sum,  if  any,  by  which  80  per  centum 
of  the  amount  of  the  net  income  in  excess 
of  the  war-profits  credit  (determined  under 
section  311)  exceeds  the  amount  of  the  tax 
computed  under  the  first  and  second  brac¬ 
kets. 


Year  1919  and  Succeeding  Years. 

(b)  For  the  taxable  year  1919  and  each 
taxable  year  thereafter  there  shall  be  levied, 
collected,  and  paid  upon  the  net  income  of 
every  corporation  (except  corporations  tax¬ 
able  under  subdivision  (c)  of  this  section j 

—59— 


a  tax  equal  to  the  sum  of  the  following: 

First  Bracket. 

20  per  centum  of  the  amount  of  the  net. 
income  in  excess  of  the  excess-profits  credit 
(determined  under  section  312)  and  not  in 
excess  of  20  per  centum  of  the  invested 
capital ; 


Second  Bracket. 

40  per  centum  of  the  amount  of  the  net 
income  in  excess  of  20  per  centum  of  the 
invested  capital. 

Income,  Excess  of  $10,000,  on  Government. 

Contracts. 

(c)  For  the  taxable  year  1919  and  each 
taxable  year  thereafter  there  shall  be  levied, 
collected,  and  paid  upon  the  net  income  of 
every  corporation  which  derives  in  such 
year  a  net  income  of  more  than  $10,000  from 
any  Government  contract  or  contracts  made 
between  April  6,  1917,  and  November  11, 
1918,  both  dates  inclusive,  a  tax  equal  to 
the  sum  of  the  following: 

^1)  Such  a  portion  of  a  tax  computed  at 
the  rates  specified  in  subdivision  (a)  as 
the  part  of  the  net  income  attributable  to 
such  Government  contract  or  contracts 
bears  to  the  entire  net  income.  In  comput¬ 
ing  such  tax  the  excess-profits  credit  and  the 
war-profits  credit  applicable  to  the  taxable 
year  shall  be  used  ; 

(2)  Such  a  portion  of  a  tax  computed  at 
the  rates  specified  in  subdivision  (b)  as  the 
part  of  the  net  income  not  attributable  to 
such  Government  contract  or  contracts 
bears  to  the  entire  net  income. 

For  the  purpose  of  determining  the  part 
of  the  net  income  attributable  to  such  Gov¬ 
ernment  contract  or  contracts,  the  proper 
apportionment  and  allocation  of  the  deduc¬ 
tions  with  respect  to  gross  income  derived 
from  such  Government  contract  or  con¬ 
tracts  and  from  other  sources,  respectively, 
shall  be  determined  under  rules  and  regu¬ 
lations  prescribed  by  the  Commissioner 
with  the  approval  of  the  Secretary. 

—60— 


(d)  In  any  case  where  the  full  amount 
of  the  excess-profits  credit  is  not  allowed 
under  the  first  bracket  of  subdivision  (a) 
or  (b),  by  reason  of  the  fact  that  such  credit 
is  in  excess  of  20  per  centum  of  the  invested 
capital,  the  part  not  so  allowed  shall  be  de¬ 
ducted  from  the  amount  in  the  second 
bracket. 


Transportation  Systems. 

(e)  For  the  purposes  of  the  Act  approved 
March  21,  1918,  entitled  “An  Act  to  provide 
for  the  operation  of  transportation  systems 
while  under  Federal  control,  for  the  just 
compensation  of  their  owners  and  for  other 
purposes,”  the  tax  imposed  by  this  title  shall 
be  treated  as  levied  by  an  Act  in  amendment 
of  Title  II  of  the  Revenue  Act  of  1917. 

Basis  of  Computation. 

Sec.  302.  That  the  tax  imposed  by  subdi¬ 
vision  (a)  of  section  301  shall  in  no  case  be 
more  than  30  per  centum  of  the  amount  of 
the  net  income  in  excess  of  $3,000  and  not 
in  excess  of  $20,000,  plus  80  per  centum  of 
the  amount  of  the  net  income  in  excess  of 
$20,000;  the  tax  imposed  by  subdivision  (b) 
of  section  301  shall  in  no  case  be  more  than 
20  per  centum  of  the  amount  of  the  net  in¬ 
come  in  excess  of  $3,000  and  not  in  excess 
of  $20,000,  plus  40  per  centum  of  the  amount 
of  the  net  income  in  excess  of  $20,000;  and 
the  above  limitations  shall  apply  to  the 
taxes  computed  under  subdivisions  (a)  and 
(b)  of  section  301,  respectively,  when  used 
in  subdivision  (c)  of  that  section.  Nothing 
in  this  section  shall  be  construed  in  such 
manner  as  to  increase  the  tax  imposed  by 
section  301. 

Income  Partly  Derived  from  Personal 
Service  Corporation. 

Sec.  303.  That  if  part  of  the  net  income 
of  a  corporation  is  derived  (1)  from  a  trade 
or  business  (or  a  branch  of  a  trade  or  busi¬ 
ness)  in  which  the  employment  of  capital  is 
necessary,  and  (2)  a  part  (constituting  not 
less  than  30  per  centum  of  its  total  net  in¬ 
come)  is  derived  from  a  separate  trade  or 
•  business  (or  a  distinctly  separate  branch  of 

— 61 — 


the  trade  or  business)  which  if  constituting 
the  sole  trade  or  business  would  bring  it 
within  the  class  of  “personal  service  cor¬ 
porations/’  then  (under  regulations  pre¬ 
scribed  by  the  Commissioner  with  the  ap¬ 
proval  of  the  Secretary)  the  tax  upon  the 
first  part  of  such  net  income  shall  be  sep¬ 
arately  computed  (allowing  in  such  compu¬ 
tation  only  the  same  proportionate  part  of 
the  credits  authorized  in  sections  311  and 
312),  and  the  tax  upon  the  second  part  shall 
be  the  same  percentage  thereof  as  the  tax 
so  computed  upon  the  first  part  of  such  first 
part :  Provided,  That  the  tax  upon  such 
second  part  shall  in  no  case  be  less  than  20 
per  centum  thereof,  unless  the  tax  upon  the 
entire  net  income,  if  computed  without  bene¬ 
fit  of  this  section,  would  constitute  less  than 
20  per  centum  of  such  entire  net  income,  in 
which  event  the  tax  shall  be  determined 
upon  the  entire  net  income,  without  refer¬ 
ence  to  this  section,  as  other  taxes  are  de¬ 
termined  under  this  title.  The  total  tax 
computed  under  this  section  shall  be  sub¬ 
ject  to  the  limitations  provided  in  section 
302. 

Corporations — When  Exempt. 

Sec.  304.  (a)  That  the  corporations  enu¬ 
merated  in  section  231  shall,  to  the  extent 
that  they  are  exempt  from  income  tax  un¬ 
der  Title  II,  be  exempt  from  taxation  under 
this  title. 

(b)  Any  corporation  whose  net  income 
for  the  taxable  year  is  less  than  $3,000  shall 
be  exempt  from  taxation  under  this  title. 

Gold  Mining. 

(c)  In  the  case  of  any  corporation  en¬ 
gaged  in  the  mining  of  gold,  the  portion  of 
the  net  income  derived  from  the  mining 
of  gold  shall  be  exempt  from  the  tax  im¬ 
posed  by  this  title,  and  the  tax  on  the  re¬ 
maining  portion  of  the  net  income  shall 
be  the  proportion  of  a  tax  computed  with¬ 
out  the  benefit  of  this  subdivision  which 
such  remaining  portion  of  the  net  income 
bears  to  the  entire  net  income. 

Apportionment  of  Exemption. 

Sec.  305.  That  if  a  tax  is  computed  un¬ 
der  this  title  for  a  period  of  less  than  twelve 

—62— 


months,  the  specific  exemption  of  $3,000, 
wherever  referred  to  in  this  title,  shall  be 
reduced  to  an  amount  which  is  the  same 
proportion  of  $3,000  as  the  number  of 
months  in  the  period  is  of  twelve  months. 

Part  III. — Credits. 

Prewar  Period  Defined. 

Sec.  310.  That  as  used  in  this  title  the 
term  “prewar  period”  means  the  calendar 
years  1911,  1912,  and  1913,  or,  if  a  corpora¬ 
tion  was  not  in  existence  during  the  whole 
of  such  period,  then  as  many  of  such  years 
during  the  whole  of  which  the  corporation 
was  in  existence. 

War-profits  Credits. 

Sec.  311.  (a)  That  the  war-profits  credit 
shall  consist  of  the  sum  of: 

(1)  A  specific  exemption  of  $3,000;  and 

(2)  An  amount  equal  to  the  average  net 
income  of  the  corporation  for  the  prewar 
period,  plus  or  minus,  as  the  case  may  be, 
10  per  centum  of  the  difference  between  the 
average  invested  capital  for  the  prewar  pe¬ 
riod  and  the  invested  capital  for  the  tax¬ 
able  year.  If  the  tax  is  computed  for  a 
period  of  less  than  twelve  months  such 
amount  shall  be  reduced  to  the  same  propor¬ 
tion  thereof  as  the  number  of  months  in 
the  period  is  of  twelve  months. 

(b)  If  the  corporation  had  no  net  income 
for  the  prewar  period,  or  if  the  amount  com¬ 
puted  under  paragraph  (2)  of  subdivision 
(a)  is  less  than  10  per  centum  of  its  in¬ 
vested  capital  for  the  taxable  year,  then 
the  war-profit's  credit  shall  be  the  sum  of : 

Specific  Exemptions. 

(1)  A  specific  exemption  of  $3,000;  and 

(2)  An  amount  equal  to  10  per  centum  of 
the  invested  capital  for  the  taxable  year. 

(c)  If  the  corporation  was  not  in  ex¬ 
istence  during  the  whole  of  at  least  one 
calendar  year  during  the  prewar  period, 
then,  except  as  provided  in  subdivision  (d), 
the  war-profits  credit  shall  be  the  sum  of : 

(1)  A  specific  exemption  of  $3,000;  and 

(2)  An  amount  equal  to  the  same  percent¬ 
age  of  the  invested  capital  of  the  taxpayer 
for  the  taxable  year  as  the  average  percent- 

—63— 


age  of  net  income  to  invested  capital,  for 
the  prewar  period,  of  corporations  engaged 
in  a  trade  or  business  of  the  same  general 
class  as  that  conducted  by  the  taxpayer; 
but  such  amount  shall  in  no  case  be  less 
than  10  per  centum  of  the  invested  capital 
of  the  taxpayer  for  the  taxable  year.  Such 
average  percentage  shall  be  determined  by 
the  Commissioner  on  the  basis  of  data  con¬ 
tained  in  returns  made  under  Tile  II  of 
the  Revenue  Act  of  1917,  and  the  average 
known  as  the  median  shall  be  used.  If 
such  average  percentage  has  not  been  de¬ 
termined  and  published  at  least  3G  days 
prior  to  the  time  when  the  return  of  the  I 
taxpayer  is  due,  then  for  purposes  of  such 
return  10  per  centum  shall  be  used  in  lieu 
thereof ;  but  such  average  percentage  when 
determined  shall  be  used  for  the  purposes  of 
section  250  in  determining  the  correct 
amount  of  the  tax. 

* 

Method  of  Determination 

(d)  The  war-profits  credit  shall  be  deter¬ 
mined  in  the  manner  provided  in  subdivi¬ 
sion  (b)  instead  of  in  the  manner  provided  , 
in  subdivision  (c),  in  the  case  of  any  cor-  ; 
poration  which  was  not  in  existence  dur¬ 
ing  the  whole  of  at  least  one  calendar  year 
during  the  prewar  period,  if  (1)  a  majority 
of  its  stock  at  any  time  during  the  taxable 
year  is  owned  or  controlled,  directly  or  in¬ 
directly,  by  a  corporation  which  was  in  ex¬ 
istence  during  the  whole  of  at  least  one 
calendar  year  during  the  prewar  period,  or 
if  (2)  50  per  centum  or  more  of  its  gross 
income  (as  computed  under  section  233  for 
income  tax  purposes)  consists  of  gains, 
profits,  commissions,  or  other  income,  de¬ 
rived  from  a  Government  contract  or  con-  . 
tracts  made  between  April  6,  1917,  and  No¬ 
vember  11,  1918,  both  dates  inclusive. 

Foreign  Corporations  Not  Entitled  to 
Specific  Exemption. 

(e)  A  foreign  corporation  shall  not  be  en¬ 
titled  to  a  specific  exemption  of  $3,000. 

Excess-Profits  Exemption. 

Sec.  312.  That  the  excess-profits  credit 
shall  consist  of  a  specific  exemption  of 


$3,000  plus  an  amount  equal  to  8  per  cen¬ 
tum  of  the  invested  capital  for  the  taxable 

year. 

A  foreign  corporation  shall  not  be  entitled 
to  the  specific  exemption  of  $3,000. 

Part  IV. — Net  Income. 

Method  of  Determination 

Sec.  320.  (a)  That  for  the  purpose  of 
this  title  the  net  income  of  a  corporation 
shall  be  ascertained  and  returned — 

(1)  For  the  calendar  years  1911  and  1912 
upon  the  same  basis  and  in  the  same  man¬ 
ner  as  provided  in  section  38  of  the  Act 
entitled  “An  Act  to  provide  revenue,  equal¬ 
ize  duties,  and  encourage  the  industries  of 
the  United  States,  and  for  other  purposes,” 
approved  August  5,  1909,  except  that  taxes 
imposed  by  such  section  and  paid  by  the 
corporation  within  the  year  shall  be  in¬ 
cluded  ; 

(2)  For  the  calendar  year  1913  upon  the 
same  basis  and  in  the  same  manner  as  pro¬ 
vided  in  Section  II  of  the  Act  entitled  “An 
Act  to  reduce  tariff  duties  and  to  provide 
revenue  for  the  Government,  and  for  other 
purposes,”  approved  October  3,  1913,  ex¬ 
cept  that  taxes  imposed  by  section  38  of 
such  Act  of  August  5,  1909,  and  paid  by 
the  corporation  within  the  year  shall  be 
included,  and  except  that  the  amounts  re¬ 
ceived  by  it  as  dividends  upon  the  stock  or 
from  the  net  earnings  of  other  corporations 
subject  to  the  tax  imposed  by  Section  II 
of  such  Act  of  October  3,  1913,  shall  be  de¬ 
ducted  ;  and 

(3)  For  the  taxable  year  upon  the  same 
basis  and  in  the  same  manner  as  provided 
for  income  tax  purposes  in  Title  II  of  this 
Act. 

(b)  The  average  net  income  for  the  pre¬ 
war  period  shall  be  determined  by  dividing 
the  number  of  years  within  that  period  dur¬ 
ing  the  whole  of  which  the  corporation  was 
in  existence  into  the  sum  of  the  net  income 
for  such  years,  even  though  there  may  have 
been  no  net  income  for  one  or  more  of 
such  years. 


—65— 


Part  V. — Invested  Capital. 

Intangible  Property. 

Sec.  325.  (a)  That  as  used  in  this  title — 

The  term  “intangible  property”  means 
patents,  copyrights,  secret  processes  and 
formulae,  good  will,  trade-marks,  trade- 
brands,  franchises,  and  other  like  property ; 

Tangible  Property. 

The  term  “tangible  property”  means 
stocks,  bonds,  notes,  and  other  evidences  of 
indebtedness,  bills  and  accounts  receivable, 
leaseholds,  and  other  property  other  than 
intangible  property; 

Personal  Capital. 

The  term  “borrowed  capital”  means 
money  or  other  property  borrowed,  whether 
represented  by  bonds,  notes,  open  accounts, 
or  otherwise;  . 

Inadmissible  Assets. 

The  term  “inadmissible  assets”  means 
stocks,  bonds,  and  other  obligations  (other 
than  obligations  of  the  United  States),  the 
dividends  or  interest  from  which  is  not  in¬ 
cluded  in  computing  net  income,  but  where 
the  income  derived  from  such  assets  con¬ 
sists  in  part  of  gain  or  profit  derived  from 
the  sale  or  other  disposition  thereof,  or 
where  all  or  part  of  the  interest  derived 
from  such  assets  is  in  effect  included  in 
the  net  income  because  of  the  limitation 
on  the  deduction  of  interest  under  para¬ 
graph  (2)  of  subdivision  (a)  of  section  234, 
a  corresponding  part  of  the  capital  invested 
in  such  assets  shall  not  be  deemed  to  be 
inadmissible  assets. 

Admissible  Assets. 

The  term  “admissible  assets”  means  all 
assets  other  than  inadmissible  assets,  valued 
in  accordance  with  the  provisions  of  sub¬ 
division  (a)  of  section  326,  section  330,  and 
section  331. 


Par  Value  of  Stock. 

(b)  For  the  purposes  of  this  title,  the 
par  value  of  stock  or  shares  shall,  in  the 
case  of  stocks  or  shares  issued  at  a  nominal 


value  or  having  no  par  value,  be  deemed 
to  be  the  fair  market  value  as  of  the  date 
or  dates  of  issue  of  such  stock  or  shares. 

Invested  Capital. 

Sec.  326.  (a)  That  as  used  in  this  title 
the  term  “invested  capital”  for  any  year 
means  (except  as  provided  in  subdivisions 
(b)  and  (c)  of  this  section) : 

(1)  Actual  cash  bona  fide  paid  in  for 
stock  or  shares; 

Cash  Value  of  Tangible  Property. 

(2)  Actual  cash  value  of  tangible  prop¬ 
erty,  other  than  cash,  bona  fide  paid  in  for 
stock  or  shares,  at  the  time  of  such  pay¬ 
ment,  but  in  no  case  to  exceed  the  par  value 
of  the  original  stock  or  shares  specifically 
issued  therefor,  unless  the  actual  cash  val¬ 
ue  of  such  tangible  property  at  the  time 
paid  in  is  shown  to  the  satisfaction  of  the 
Commissioner  to  have  been  clearly  and  sub¬ 
stantially  in  excess  of  such  par  value,  in 
which  case  such  excess  shall  be  treated  as 
paid-in  surplus:  Proznded,  That  the  Com¬ 
missioner  shall  keep  a  record  of  all  cases 
in  which  tangible  property  is  included  in 
invested  capital  at  a  value  in  excess  of  the 
stock  or  shares  issued  therefor,  containing 
the  name  and  address  of  each  taxpayer,  the 
business  in  which  engaged,  the  amount  of 
invested  capital  and  net  income  shown  by 
the  return,  the  value  of  the  tangible  prop¬ 
erty  at  the  time  paid  in,  the  par  value  of 
the  stock  or  shares  specifically  issued 
therefor,  and  the  amount  included  under 
this  paragraph  as  paid-in  surplus.  The 
Commissioner  shall  furnish  a  copy  of  such 
record  and  other  detailed  information  with 
respect  to  such  cases  when  required  by 
resolution  of  either  House  of  Congress, 
without  regard  to  the  restrictions  contained 
in  section  257 ; 

Surplus  and  Undivided  Profits. 

(3)  Paid-in  or  earned  surplus  and  un¬ 
divided  profits;  not  including  surplus  and 
undivided  profits  earned  during  the  year; 

Intangible  Property  Paid  in  for  Stock. 

(4)  Intangible  property  bona  fide  paid  in 
for  stock  or  shares  prior  to  March  3,  1917, 

—67— 


in  an  amount  not  exceeding  (a)  the  actual 
cash  value  of  such  property  at  the  time  paid 
in,  (b)  the  par  value  of  the  stock  or  shares 
issued  therefor,  or  (c)  in  the  aggregate  25 
per  centum  of  the  par  value  of  the  total 
stock  or  shares  of  the  corporation  outstand¬ 
ing  on  March  3,  191Z,  whichever  is  lowest; 

(5)  Intangible  property  bona  fide  paid  in 
for  stock  or  shares  on  or  after  March  3, 
1917,  in  an  amount  not  exceeding  (a)  the 
actual  cash  value  of  such  property  at  the 
time  paid  in,  (b)  the  par  value  of  the  stock 
or  shares  issued  therefor,  or  (c)  in  the  ag¬ 
gregate  25  per  centum  of  the  par  value  of 
the  total  stock  or  shares  of  the  corporation 
outstanding  at  the  beginning  of  the  taxable 
year,  whichever  is  lowest:  Provided,  That 
in  no  case  shall  the  total  amount  included 
under  paragraphs  (4)  and  (5)  exceed  in  the 
aggregate  25  per  centum  of  the  par  value 
of  the  total  stock  or  shares  of  the  corpora¬ 
tion  outstanding  at  the  beginning  of  the 
taxable  year;  but 

(b)  As  used  in  this  title  the  term  “in¬ 
vested  capital”  does  not  include  borrowed 
capital. 

Invested  Capital  Deductions. 

(c)  There  shall  be  deducted  from  in¬ 
vested  capital  as  above  defined  a  percentage 
thereof  equal  to  the  percentage  which  the 
amount  of  inadmissible  assets  is  of  the 
amount  of  admissible  and  inadmissible  as¬ 
sets  held  during  the  taxable  year. 

Average  Invested  Capital. 

(d)  The  invested  capital  for  any  period 
shall  be  the  average  invested  capital  for 
such  period,  but  in  the  case  of  a  corporation 
making  a  return  for  a  fractional  part  of  a 
year,  it  shall  (except  for  the  purpose  of 
paragraph  (2)  of  subdivision  (a)  of  section 
311)  be  the  same  fractional  part  of  such 
average  invested  capital. 

The  average  invested  capital  for  the  pre¬ 
war  period  shall  be  determined  by  dividing 
the  number  of  years  within  that  period  dur¬ 
ing  the  whole  of  which  the  corporation  was 
in  existence  into  the  sum  of  the  average 
invested  capital  for  such  years. 

Determination  of  Invested  Capital. 

Sec.  327.  That  in  the  following  cases  the 

—68— 


tax  shall  be  determined  as  provided  in  sec¬ 
tion  328: 

(a)  Where  the  Commissioner  is  unable 
to  determine  the  invested  capital  as  pro¬ 
vided  in  section  326; 

(b)  In  the  case  of  a  foreign  corporation ; 

(c)  Where  a  mixed  aggregate  of  tangible 
property  and  intangible  property  has  been 
paid  in  for  stock  or  for  stock  and  bonds 
and  the  Commissioner  is  unable  satisfac¬ 
torily  to  determine  the  respective  values  of 
the  several  classes  of  property  at  the  time 
of  payment,  or  to  distinguish  the  classes  of 
property  paid  in  for  stock  and  for  bonds, 
respectively ; 

(d)  Where  upon  application  by  the  cor¬ 
poration  the  Commissioner  finds  and  so  de¬ 
clares  of  record  that  the  tax  if  determined 
without  benefit  of  this  section  would,  ow¬ 
ing  to  abnormal  conditions  affecting  the  cap¬ 
ital  or  income  of  the  corporation,  work  upon 
the  corporation  an  exceptional  hardship 
evidenced  by  gross  disproportion  between 
the  tax  computed  without  benefit  of  this 
section  and  the  tax  computed  by  reference 
to  the  representative  corporations  specified 
in  section  328.  This  subdivision  shall  not 
apply  to  any  case  (1)  in  which  the  tax 
(computed  without  benefit  of  this  section) 
is  high  merely  because  the  corporation 
earned  within  the  taxable  year  a  high  rate 
of  profits  upon  a  normal  invested  capital 
nor  (2)  in  which  50  per  centum  or  more  of 
the  gross  income  of  the  corporation  for  the 
taxable  year  (computed  under  section  233 
of  Title  II)  consists  of  gains,  profits,  com¬ 
missions,  or  other  income,  derived  on  a  cost- 
plus  basis  from  a  Government  contract  or 
contracts  made  between  April  6,  1917,  and 
November  11,  1918,  both  dates  inclusive. 


Computations — Conditions. 

Sec.  328.  (a)  In  the  cases  specified  in 
section  327  the  tax  shall  be  the  amount 
which  bears  the  same  ratio  to  the  net  in¬ 
come  of  the  taxpayer  (in  excess  of  the  spe¬ 
cific  exemption  of  $3,000)  for  the  taxable 
year,  as  the  average  tax  of  representative 
corporations  engaged  in  a  like  or  similar 

—69— 


trade  or  business,  bears  to  their  average  net 
income  (in  excess  of  the  specific  exemption 
of  $3,000)  for  such  year.  In  the  case  of  a 
foreign  corporation  the  tax  shall  be  com¬ 
puted  without  deducting  the  specific  ex¬ 
emption  of  $3,000  either  for  the  taxpayer 
or  the  representative  corporations. 

In  computing  the  tax  under  this  section 
the  Commissioner  shall  compare  the  tax¬ 
payer  only  with  representative  corporations 
whose  invested  capital  can  be  satisfactorily 
determined  under  section  326  and  which  are, 
as  nearly  as  may  be,  similarly  circum¬ 
stanced  with  respect  to  gross  income,  net 
income,  profits  per  unit  of  business  trans¬ 
acted  and  capital  employed,  the  amount  and 
rate  of  war  profits  or  excess  profits,  and 
all  other  relevant  facts  and  circumstances. 

(b)  For  the  purposes  of  subdivision  (a) 
the  ratios  between  the  average  tax  and  the 
average  net  income  of  representative  cor¬ 
porations  shall  be  determined  by  the  Com¬ 
missioner  in  accordance  with  regulations 
prescribed  by  him  with  the  approval  of  the 
Secretary. 

In  cases  in  which  the  tax  is  to  be  com¬ 
puted  under  this  section,  if  the  tax  as  com¬ 
puted  without  the  benefit  of  this  section  is 
less  than  50  per  centum  of  the  net  income 
of  the  taxpayer,  the  installments  shall  in 
the  first  instance  be  computed  upon  the 
basis  of  such  tax;  but  if  the  tax  so  com¬ 
puted  is  50  per  centum  or  more  of  the  net 
income,  the  installments  shall  in  the  first 
instance  be  computed  upon  the  basis  of  a 
tax  equal  to  50  per  centum  of  the  net  in¬ 
come.  In  any  case,  the  actual  ratio  when 
ascertained  shall  be  used  in  determining  the 
correct  amount  of  the  tax.  If  the  correct 
amount  of  the  tax  when  determined  exceeds 
50  per  centum  of  the  net  income,  any  excess 
of  the  correct  installments  over  the  amounts 
actually  paid  shall  on  notice  and  demand 
be  paid  together  with  interest  at  the  rate  of 
Yi  of  1  per  centum  per  month  on  such  ex¬ 
cess  from  the  time  the  installment  was  due. 


Commissioner’s  Record — Report  to 
Congress. 

(c)  The  Commissioner  shall  keep  a 
record  of  all  cases  in  which  the  tax  is  de- 


—70— 


termined  in  the  manner  prescribed  in  subdi¬ 
vision  (a),  containing  the  name  and  address 
of  each  taxpayer,  the  business  in  which  en¬ 
gaged,  the  amount  of  invested  capital  and 
net  income  shown  by  the  return,  and  the 

«r 

amount  of  invested  capital  as  determined 
under-  such  subdivision.  The  Commis¬ 
sioner  shall  furnish  a  copy  of  such  record 
and  other  detailed  information  with  respect 
to  such  cases  when  required  by  resolution 
of  either  House  of  Congress,  without  regard 
to  the  restrictions  contained  in  section  257. 

Part  VI. — Reorganizations. 

Sec.  330.  That  in  the  case  of  the  reor¬ 
ganization,  consolidation,  or  change  of  own¬ 
ership  after  January  1,  1911,  of  a  trade  or 
business  now  carried  on  by  a  corporation, 
the  corporation  shall  for  the  purposes  of 
this  title  be  deemed  to  have  been  in  exist¬ 
ence  prior  to  that  date,  and  the  net  income 
and  invested  capital  of  such  predecessor 
trade  or  business  for  all  or  any  part  of  the 
prewar  period  prior  to  the  organization  of 
the  corporation  now  carrying  on  such  trade 
or  business  shall  be  deemed  to  have  been  the 
net  income  and  invested  capital  of  such  cor¬ 
poration. 

If  such  predecessor  trade  or  business  was 
carried  on  by  a  partnership  or  individual 
the  net  income  for  the  prewar  period  shall, 
under  regulations  prescribed  by  the  Com¬ 
missioner  with  the  approval  of  the  Secre¬ 
tary,  be  ascertained  and  returned  as  nearly 
as  may  be  upon  the  same  basis  and  in  the 
same  manner  as  provided  for  corporations 
in  Title  II,  including  a  reasonable  deduction 
for  salary  or  compensation  to  each  partner 
or  the  individual  for  personal  services  ac¬ 
tually  rendered. 

In  the  case  of  the  organization  as  a  cor¬ 
poration  before  July  1,  1919,  of  any  trade 
or  business  in  which  capital  is  a  material 
income-producing  factor  and  which  was 
previously  owned  by  a  partnership  or  indi¬ 
vidual,  the  net  income  of  such  trade  or  busi¬ 
ness  from  January  1,  1918,  to  the  date  of 
such  reorganization  may  at  the  option  of 
the  individual  or  partnership  be  taxed  as 
the  net  income  of  a  corporation  is  taxed 
under  Titles  II  and  III;  in  which  event  the 

—71— 


net  income  and  invested  capital  of  such 
trade  or  business  shall  be  computed  as  if 
such  corporation  had  been  in  existence  on 
and  after  January  1,  1918,  and  the  undis¬ 
tributed  profits  or  earnings  of  such  trade  or 
business  shall  not  be  subject  to  the  surtax 
imposed  in  section  211,  but  amounts  dis¬ 
tributed  on  or  after  January  1,  1918,  from 
the  earnings  of  such  trade  or  business  shall 
be  taxed  to  the  recipients  as  dividends,  and 
all  the  provisions  of  Titles  II  and  III  relat¬ 
ing  to  corporations  shall,  so  far  as  practi¬ 
cable,  apply  to  such  trade  or  business :  Pro¬ 
vided,  That  this  paragraph  shall  not  apply 
to  any  trade  or  business  the  net  income  of 
which  for  the  taxable  year  1918  was  less 
than  20  per  centum  of  its  invested  capital 
for  such  year :  Provided  further,  That  any 
taxpayer  who  takes  advantage  of  this  para¬ 
graph  shall  pay  the  tax  imposed  by  sec¬ 
tion  1000  of  this  Act  and  by  the  first  sub¬ 
division  of  section  407  of  the  Revenue  Act 
of  1916,  as  if  such  taxpayer  had  been  a  cor¬ 
poration  on  and  after  January  1,  1918,  with 
a  capital  stock  having  no  par  value. 

If  any  asset  of  the  trade  or  business  in 
existence  both  during  the  taxable  year  and 
any  prewar  year  is  included  in  the  invested 
capital  for  the  taxable  year  but  is  not  in¬ 
cluded  in  the  invested  capital  for  such  pre¬ 
war  year,  or  is  valued  on  a  different  basis 
in  computing  the  invested  capital  for  the 
taxable  year  and  such  prewar  year,  respec¬ 
tively,  then  under  rules  and  regulations  to 
be  prescribed  by  the  Commissioner  with 
the  approval  of  the  Secretary  such  read¬ 
justments  shall  be  made  as  are  necessary 
to  place  the  computation  of  the  invested 
capital  for  such  prewar  year  on  the  basis 
employed  in  determining  the  invested  cap¬ 
ital  for  the  taxable  year. 

Sec.  331.  In  the  case  of  the  reorganiza¬ 
tion,  consolidation,  or  change  of  ownership 
of  a  trade  or  business,  or  change  of  own¬ 
ership  of  property,  after  March  3,  1917,  if  an 
interest  or  control  in  such  trade  or  business 
or  property  of  50  per  centum  or  more  re¬ 
mains  in  the  same  persons,  or  any  of  them, 
then  no  asset  transferred  or  received  from 
the  previous  owner  shall,  for  the  purpose  of 
determining  invested  capital,  be  allowed  a 

—72— 


greater  value  than  would  have  been  al¬ 
lowed  under  this  title  in  computing  the  in¬ 
vested  capital  of  such  previous  owner  if 
such  asset  had  not  been  so  transferred  or 
received :  Provided,  That  if  such  previous 
owner  was  not  a  corporation,  then  the  value 
of  any  asset  so  transferred  or  received  shall 
be  taken  at  its  cost  of  acquisition  (at  the 
date  when  acquired  by  such  previous 
owner)  with  proper  allowance  for  deprecia¬ 
tion,  impairment,  betterment  or  develop¬ 
ment,  but  no  addition  to  the  original  cost 
I  shall  be  made  for  any  charge  or  expenditure 
j  deducted  as  expense  or  otherwise  on  or  after 
I  March  1,  1913,  in  computing  the  net  income 
of  such  previous  owner  for  purposes  of  tax¬ 
ation. 


Part  VII. — Miscellaneous. 
Corporations  Other  Than  Personal  Service 

Corporations. 

Sec.  335.  (a)  That  if  a  corporation  (other 
than  a  personal  service  corporation)  makes 
return  for  a  fiscal  year  beginning  in  1917 
and  ending  in  1918,  the  tax  for  the  first 
taxable  year  under  this  title  shall  be  the 
sum  of:  (1)  The  same  proportion  of  a  tax 
for  the  entire  period  computed  under  Title 
II  of  the  Revenue  Act  of  1917  which  the 
portion  of  such  period  falling  within  the 
calendar  year  1917  is  of  the  entire  period, 
and  (2)  the  same  proportion  of  a  tax  for  the 
entire  period  computed  under  this  title  at 
the  rates  specified  in  subdivision  (a)  of  sec¬ 
tion  301  which  the  portion  of  such  period 
falling  within  the  calendar  year  1918  is  of 
the  entire  period. 

Any  amount  heretofore  or  hereafter  paid 
on  account  of  the  tax  imposed  for  such  fis¬ 
cal  year  by  Title  II  of  the  Revenue  Act  of 
1917  shall  be  credited  toward  the  payment 
of  the  tax  imposed  for  such  fiscal  year  by 
this  title,  and  if  the  amount  so  paid  ex¬ 
ceeds  the  amount  of  the  tax  imposed  by  this 
title,  the  excess  shall  be  credited  or  refunded 
to  the  corporation  in  accordance  with  the 
provisions  of  section  252. 

— 73 — 


Tax  Computation  for  Fiscal  Year  Beginning 
1918,  Ending  1919 — Refunds. 

(b^  If  a  corporation  makes  return  for 
a  fiscal  year  beginning  in  1918  and  ending 
in  1919,  the  tax  for  such  fiscal  year  under 
this  title  shall  be  the  sum  of:  (1)  the  same 
proportion  of  tax  for  the  entire  period  com¬ 
puted  under  subdivision  (a)  of  section  301 
which  the  portion  of  such  period  falling 
within  the  calendar  year  1918  is  of  the  en¬ 
tire  period,  and  (2)  the  same  proportion  of 
a  tax  for  the  entire  period  computed  under 
subdivision  (b)  or  (c)  of  section  301  which 
the  portion  of  such  period  falling  within  the 
calendar  year  1919  is  of  the  entire  period. 

(c)  If  a  partnership  or  a  personal  serv¬ 
ice  corporation  makes  return  for  a  fiscal 
year  beginning  in  1917  and  ending  in  1918, 
it  shall  pay  the  same  proportion  of  a  tax 
for  the  entire  period  computed  under  Title 
II  of  the  Revenue  Act  of  1917  which 
the  portion  of  such  period  falling  within  the 
calendar  year  1917  is  of  the  entire  period. 

Any  tax  paid  by  a  partnership  or  per¬ 
sonal  service  corporation  for  any  period 
beginning  on  or  after  January  1,  1918,  shall 
be  immediately  refunded  to  the  partnership 
or  corporation  as  a  tax  erroneously  or  il¬ 
legally  collected. 

Corporations  Not  Exempt  to  Make  Returns. 

Sec.  336.  That  every  corporation,  not  ex¬ 
empt  under  section  304,  shall  make  a  return 
for  the  purposes  of  this  title.  Such  returns 
shall  be  made,  and  the  taxes  imposed  by 
this  title  shall  be  paid,  at  the  same  times 
and  places,  in  the  same  manner,  and  subject 
to  the  same  conditions,  as  is  provided  in 
the  case  of  returns  and  payment  of  income 
tax  by  corporations  for  the  purposes  of 
Title  II,  and  all  the  provisions  of  that  title 
not  inapplicable,  including  penalties,  are 
hereby  made  applicable  to  the  taxes  imposed 
by  this  title. 


Sale  of  Mines,  Oil  or  Gas  Wells. 

Sec.  337.  That  in  the  case  of  a  bona  fide 
sale  of  mines,  oil  or  gas  wells,  or  any  inter¬ 
est  therein,  where  the  principal  value  of 

—74— 


I 


the  property  has  been  demonstrated  by 
prospecting  or  exploration  and  discovery 
work  done  by  the  taxpayer,  the  portion  of 
the  tax  imposed  by  this  title  attributable  to 
such  sale  shall  not  exceed  s20  per  centum  of 
the  selling  price  of  such  property  or  interest. 

TITLE  IV.— ESTATE  TAX. 

Definitions :  “Executor” — “Collector.” 

Sec.  400.  That  when  used  in  this  title — 

1  he  term  “executor”  means  the  executor 
or  administrator  of  the  decedent,  or,  if  there 
is  no  executor  or  administrator,  any  person 
who  takes  possession  of  any  property  of  the 
decedent ;  and 

The  term  “collector”  means  the  collector 
of  internal  revenue  of  the  district  in  which 
was  the  domicile  of  the  decedent  at  the  time 
of  his  death,  or,  if  there  was  no  such  domi¬ 
cile  in  the  United  States,  then  the  collector 
of  the  district  in  which  is  situated  the  part 
of  the  gross  estate  of  the  decedent  in  the 
United  States,  or,  if  such  part  of  the  gross 
estate  is  situated  in  more  than  one  district, 
then  the  collector  of  internal  revenue  of 
such  district  as  may  be  designated  by  the 
Commissioner. 

Rates. 

Sec.  401.  That  (in  lieu  of  the  tax  im¬ 
posed  by  Title  II  of  the  Revenue  Act  of 
1916,  as  amended,  and  in  lieu  of  the  tax  im¬ 
posed  by  Title  IX  of  the  Revenue  Act  of 
1917)  a  tax  equal  to  the  sum  of  the  follow¬ 
ing  percentages  of  the  value  of  the  net  es¬ 
tate  (determined  as  provided  in  section 
403)  is  hereby  imposed  upon  the  transfer  of 
the  net  estate  of  every  decedent  dying  after 
the  passage  of  this  Act,  whether  a  resident 
or  nonresident  of  the  United  States: 

1  per  centum  of  the  amount  of  the  net 
estate  not  in  excess  of  $50,000; 

2  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $50,000  and  does  not  ex¬ 
ceed  $150,000; 

3  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $150,000  and  does  not  ex¬ 
ceed  $250,000 ; 

4  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $250,000  and  does  not 
exceed  $450,000; 


—75— 


6  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $450,000  and  does  not  ex¬ 
ceed  $750,000; 

8  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $750,000  and  does  not  ex¬ 
ceed  $1,000,000; 

10  per  centum  of  the  amount  by  which 
the  net  estate  exceeds  $1,000,000  and  does 
not  exceed  $1,500,000; 

12  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $1,500,000  and  does  not 
exceed  $2,000,000; 

14  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $2,000,000  and  does  not 
exceed  $3,000,000; 

16  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $3,000,000  and  does  not 
exceed  $4,000,000 ; 

18  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $4,000,000  and  does  not 
exceed  $5,000,000; 

20  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $5,000,000  and  does  not 
exceed  $8,000,000; 

22  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $8,000,000  and  does  not 
exceed  $10,000,000;  and 

25  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $10,000,000. 

Exemptions — Army  or  Navy  Service 

The  taxes  imposed  by  this  title  or  by 
Title  II  of  the  Revenue  Act  of  1916  (as 
amended  by  the  Act  entitled  “An  Act  to 
provide  increased  revenue  to  defray  the  ex¬ 
penses  of  the  increased  appropriations  for 
the  army  and  navy  and  the  extensions  of 
fortifications,  and  for  other  purposes,”  ap¬ 
proved  March  3,  1917)  or  by  Titl**  IX  of  the 
Revenue  Act  of  1917,  shall  not  apply  to  the 
transfer  of  the  net  estate  of  any  decedent 
who  has  died  or  may  die  while  serving  in  the 
military  or  naval  forces  of  the  United  States 
in  the  present  war  or  from  injuries  received 
or  disease  contracted  while  in  such  service, 
and  any  such  tax  collected  upon  such  trans¬ 
fer  shall  be  refunded  to  the  executor. 


—76— 


Determination  of  Gross  Estate 

Sec.  402.  That  the  value  of  the  gross  es¬ 
tate  of  the  decedent  shall  be  determined  by 
including  the  value  at  the  time  of  his  death 
of  all  property,  real  or  personal,  tangible 
or  intangible,  wherever  situated — 

(a)  To  the  extent  of  the  interest  therein 
of  the  decedent  at  the  time  of  his  death 
which  after  his  death  is  subject  to  the  pay¬ 
ment  of  the  charges  against  his  estate  and 
the  expenses  of  its  administration  and  is 
subject  to  distribution  as  part  of  his  es¬ 
tate  ; 

(b)  To  the  extent  of  any  interest  therein 
of  the  surviving  spouse,  existing  at  the  time 
of  the  decedent’s  death  as  dower,  courtesy, 
or  by  virtue  of  a  statute  creating  an  estate  in 
lieu  of  dower  or  courtesy; 

(c)  To  the  extent  of  any  interest  therein 
of  which  the  decedent  has  at  any  time  made 
a  transfer,  or  with  respect  to  which  he  has 
at  any  time  created  a  trust,  in  contempla¬ 
tion  of  or  intended  to  take  effect  in  posses¬ 
sion  or  enjoyment  at  or  after  his  death 
(whether  such  transfer  or  trust  is  made  or 
created  before  or  after  the  passage  of  this 
Act),  except  in  case  of  a  bona  fide  sale  for  a 
fair  consideration  in  money  or  money’s 
worth.  Any  transfer  of  a  material  part  of 
his  property  in  the  nature  of  a  final  disposi¬ 
tion  or  distribution  thereof,  made  by  the 
decedent  within  two  years  prior  to  his  death 
without  such  a  consideration,  shall,  unless 
shown  to  the  contrary,  be  deemed  to  have 
been  made  in  contemplation  of  death  within 
the  meaning  of  this  title; 

(d)  To  the  extent  of  the  interest  therein 
held  jointly  or  as  tenants  in  the  entirety  by 
the  decedent  and  any  other  person,  or  de¬ 
posited  in  banks  or  other  institutions  in 
their  joint  names  and  payable  to  either  or 
the  survivor,  except  such  part  thereof  as 
may  be  shown  to  have  originally  belonged 
to  such  other  person  and  never  to  have  be¬ 
longed  to  the  decedent ; 

(e)  To  the  extent  of  any  property  pass¬ 
ing  under  a  general  power  of  appointment 
exercised  by  the  decedent  (1)  by  will,  or  (2) 

—77— 


by  deed  executed  in  contemplation  of,  or 
intended  to  take  effect  in  possession  or  en¬ 
joyment  at  or  after,  his  death,  except  in  case 
of  a  bona  fide  sale  for  a  fair  consideration  in 
money  or  money’s  worth;  and 

(f)  To  the  extent  of  the  amount  receiva¬ 
ble  by  the  executor  as  insurance  under 
policies  taken  out  by  the  decedent  upon  his 
own  life ;  and  to  the  extent  of  the  excess 
over  $40,000  of  the  amount  receivable  by  all 
other  beneficiaries  as  insurance  under  poli¬ 
cies  taken  out  by  the  decedent  upon  his  own 
life. 


Determination  of  Net  Estate. 

Sec.  403.  That  for  the  purpose  of  the  tax 
the  value  of  the  net  estate  shall  be  deter¬ 
mined — 


Resident  Deductions. 

(a)  In  the  case  of  a  resident,  by  deduct¬ 
ing  from  the  value  of  the  gross  estate — 

(1)  Such  amounts  for  funeral  expenses, 
administration  expenses,  claims  against  the 
estate,  unpaid  mortgages,  losses  incurred 
during  the  settlement  of  the  estate  arising 
from  fires,  storms,  shipwreck,  or  other 
casualty,  or  from  theft,  when  such  losses 
are  not  compensated  for  by  insurance  or 
otherwise,  and  such  amounts  reasonably  re¬ 
quired  and  actually  expended  for  the  sup¬ 
port  during  the  settlement  of  the  estate  of 
those  dependent  upon  the  decedent,  as  are 
allowed  by  the  laws  of  the  jurisdiction, 
whether  within  or  without  the  United 
States,  under  which  the  estate  is  being  ad¬ 
ministered,  but  not  including  any  income 
taxes  upon  income  received  after  the  death 
of  the  decedent,  or  any  estate,  succession, 
legacy,  or  inheritance  taxes ; 

(2)  An  amount  equal  to  the  value  at  the 
time  of  the  decedent’s  death  of  any  proper¬ 
ty,  real,  personal,  or  mixed,  which  can  be 
identified  as  having  been  received  by  the  de¬ 
cedent  as  a  share  in  the  estate  of  any  per¬ 
son  who  died  within  five  years  prior  to  the 
death  of  the  decedent,  or  which  can  be  iden¬ 
tified  as  having  been  acquired  by  the  de¬ 
cedent  in  exchange  for  property  so  received, 
if  an  estate  tax  under  the  Revenue  Act  of 


—78— 


1917  or  under  this  Act  was  collected  from 
such  estate,  and  if  such  property  is  included 
in  the  decedent’s  gross  estate; 

Gifts,  Etc.,  When  Exempt. 

(3)  The  amount  of  all  bequests,  legacies, 
devises,  or  gifts,  to  or  for  the  use  of  the 
United  States,  any  state,  territory,  any  polit¬ 
ical  subdivision  thereof,  or  the  District  of 
Columbia,  for  exclusively  public  purposes, 
or  to  or  for  the  use  of  any  corporation  or¬ 
ganized  and  operated  exclusively  for  relig¬ 
ious,  charitable,  scientific,  literary,  or  edu¬ 
cational  purposes,  including  the  encourage¬ 
ment  of  art  and  the  prevention  of  cruelty  to 
children  or  animals,  no  part  of  the  net  earn¬ 
ings  of  which  inures  to  the  benefit  of  any 
private  stockholder  or  individual,  or  to  a 
trustee  or  trustees  exclusively  for  such 
religious,  charitable,  scientific,  literary,  or 
educational  purposes.  This  deduction  shall 
be  made  in  case  of  the  estates  of  all  dece¬ 
dents  who  have  died  since  December  31, 
1917 ; and 

Specific  Exemption. 

(4)  An  exemption  of  $50,000; 

(b)  In  the  case  of  a  nonresident,  by  de¬ 
ducting  from  the  value  of  that  part  of  his 
gross  estate  which  at  the  time  of  his  death 
is  situated  in  the  United  States — 

Nonresident  Deductions. 

(1)  That  proportion  of  the  deductions 
specified  in  paragraph  (1)  of  subdivision 
(a)  of  this  section  which  the  value  of  such 
part  bears  to  the  value  of  his  entire  gross 
estate,  wherever  situated,  but  in  no  case 
shall  the  amount  so  deducted  exceed  10  per 
centum  of  the  value  of  that  part  of  his  gross 
estate  which  at  the  time  of  his  death  is  situ¬ 
ated  in  the  United  States; 

(2)  An  amount  equal  to  the  value  at  the 
time  of  the  decedent’s  death  of  any  prop¬ 
erty,  real,  personal,  or  mixed,  which  can  be 
identified  as  having  been  received  by  the 
decedent  as  a  share  in  the  estate  of  any  per¬ 
son  who  died  within  five  years  prior  to  the 
death  of  the  decedent,  or  which  can  be 
identified  as  having  been  acquired  by  the 

—79— 


decedent  in  exchange  for  property  so  re¬ 
ceived,  if  an  estate  tax  under  the  Revenue 
Act  of  1917  or  under  this  Act  was  collected 
from  such  estate,  and  if  such  property  is  in¬ 
cluded  in  that  part  of  the  decedent’s  gross 
estate  which  at  the  time  of  his  death  is  situ¬ 
ated  in  the  United  States;  and 

Gifts,  Etc.,  When  Exempt. 

(3)  The  amount  of  all  bequests,  legacies, 
devises,  or  gifts,  to  or  for  the  use  of  the 
United  States,  any  state,  territory,  any  po¬ 
litical  subdivision  thereof,  or  the  District  of 
Columbia,  for  exclusively  public  purposes, 
or  to  or  for  the  use  of  any  domestic  corpo¬ 
ration  organized  and  operated  exclusively 
for  religious,  charitable,  scientific,  literary, 
or  educational  purposes,  including  the  en¬ 
couragement  of  art  and  the  prevention  of 
cruelty  to  children  or  animals,  no  part  of 
the  net  earnings  of  which  inures  to  the  bene¬ 
fit  of  any  private  stockholder  or  individual, 
or  to  a  trustee  or  trustees  exclusively  for 
such  religious,  charitable,  scientific,  liter¬ 
ary,  or  educational  purposes  within  the 
United  States.  This  deduction  shall  be 
made  in  case  of  the  estates  of  all  decedents 
who  have  died  since  December  31,  1917; 
and 

No  deductions  shall  be  allowed  in  the 
case  of  a  nonresident  unless  the  executor  in¬ 
cludes  in  the  return  required  to  be  filed  un¬ 
der  section  404  the  value  at  the  time  of  his 
death  of  that  part  of  the  gross  estate  of  the 
nonresident  not  situated  in  the  United 
States. 

For  the  purpose  of  this  title  stock  in  a  do¬ 
mestic  corporation  owned  and  held  by  a  non¬ 
resident  decedent,  and  the  amount  receivable 
as  insurance  upon  the  life  of  a  nonresident 
decedent  where  the  insurer  is  a  domestic 
corporation,  shall  be  deemed  property  with¬ 
in  the  United  States,  and  any  property  of 
which  the  decedent  has  made  a  transfer  or 
with  respect  to  which  he  has  created  a 
trust,  within  the  meaning  of  subdivision  (c) 
of  section  402,  shall  be  deemed  to  be  situ- 


—80— 


ated  in  the  United  States,  if  so  situated 
either  at  the  time  of  the  transfer  or  the 
creation  of  the  trust,  or  at  the  time  of  the 
decedent’s  death. 


Refunds. 

In  the  case  of  any  estate  in  respect  to 
which  the  tax  under  existing  law  has  been 
paid,  if  necessary  to  allow  the  benefit  of  the 
.deduction  under  paragraph  (3)  of  subdi¬ 
vision  (a)  or  (b)  the  tax  shall  be  redeter¬ 
mined  and  any  excess  of  tax  paid  shall  be 
refunded  to  the  executor. 

Duties  of  Executor. 

Sec.  404.  That  the  executor,  within  sixty 
days  after  qualifying  as  such,  or  after  com¬ 
ing  into  possession  of  any  property  of  the 
decedent,  whichever  event  first  occurs,  shall 
give  written  notice  thereof  to  the  collector. 
The  executor  shall  also,  at  such  times  and  in 
such  manner  as  may  be  required  by  regula¬ 
tions  made  pursuant  to  law,  file  with  the 
collector  a  return  under  oath  in  duplicate, 
setting  forth  (a)  the  value  of  the  gross  es¬ 
tate  of  the  decedent  at  the  time  of  his  death, 
or,  in  case  of  a  nonresident,  of  that  part  of 
his  gross  estate  situated  in  the  United 
States;  (b)  the  deductions  allowed  under 
section  403;  (c)  the  value  of  the  net  estate 
of  the  decedent  as  defined  in  section  403; 
and  (d)  the  tax  paid  or  payable  thereon; 
or  such  part  of  such  information  as  may  at 
the  time  be  ascertainable  and  such  supple¬ 
mental  data  as  may  be  necessary  to  estab¬ 
lish  the  correct  tax. 

Returns — When  Made — Inability  to  Make 
Complete  Returns. 

Return  shall  be  made  in  all  cases  where 
the  gross  estate  at  the  death  of  the  de¬ 
cedent  exceeds  $50,000,  and  in  the  case  of 
the  estate  of  every  nonresident  any  part  of 
whose  gross  estate  is  situated  in  the  United 
States.  If  the  executor  is  unable  to  make  a 
complete  return  as  to  any  part  of  the  gross 
estate  of  the  decedent,  he  snail  include  in 
his  return  a  description  of  such  part  and  the 

—81— 


name  of  every  person  holding  a  legal  or 
beneficial  interest  therein,  and  upon  notice 
from  the  collector  such  person  shall  in  like 
manner  make  a  return  as  to  such  part  of  the 
gross  estate.  The  Commissioner  shall  make 
all  assessments  of  the  tax  under  the  author¬ 
ity  of  existing  administrative  special  and 
general  provisions  of  law  relating  to  the  as¬ 
sessment  and  collection  of  taxes. 

Administration  Not  Granted — No  Return — 

False  Return. 

Sec.  405.  That  if  no  administration  is 
granted  upon  the  estate  of  a  decedent,  or  if 
no  return  is  filed  as  provided  in  section  404, 
or  if  a  return  contains  a  false  or  incorrect 
statement  of  a  material  fact,  the  collector  or 
deputy  collector  shall  make  a  return  and  the 
Commissioner  shall  assess  the  tax  thereon. 

Tax — When  Due. 

Sec.  406.  That  the  tax  shall  be  due  one 
year  after  the  decedent’s  death ;  but  in  any 
case  where  the  Commissioner  finds  that  pay¬ 
ment  of  the  tax  within  one  year  after  the 
decedent’s  death  would  impose  undue 
hardship  upon  the  estate,  he  may  grant  an 
extension  of  time  for  the  payment  of  the 
tax  for  a  period  not  to  exceed  three  years 
from  the  due  date.  If  the  tax  is  not  paid 
within  one  year  and  180  days  after  the  de¬ 
cedent’s  death,  interest  at  the  rate  of  6  per 
centum  per  annum  from  the  expiration  of 
one  year  after  the  decedent’s  death  shall  be 
added  as  part  of  the  tax. 

Payments  When  Correct  Amount  Is  Not 
Determinable — Refund. 

Sec.  407.  That  the  executor  shall  pay  the 
tax  to  the  collector  or  deputy  collector.  If 
the  amount  of  the  tax  can  not  be  determined, 
the  payment  of  a  sum  of  money  sufficient,  in 
the  opinion  of  the  collector,  to  discharge  the 
tax  shall  be  deemed  payment  in  full  of  the 
tax,  except  as  in  this  section  otherwise  pro¬ 
vided.  If  the  amount  son  paid  exceeds  the 
amount  of  the  tax  as  finally  determined, 
the  Commissioner  shall  refund  such  ex¬ 
cess  to  the  executor.  If  the  amount  of  the 
tax  as  finally  determined  exceeds  the 

—82— 


amount  so  paid,  the  collector  shall  notify 
the  executor  of  the  amount  of  such  excess 
and  demand  payment  thereof.  If  such  ex¬ 
cess  part  of  the  tax  is  not  paid  within  thirty 
days  after  such  notification,  interest  shall  be 
added  thereto  at  the  rate  of  10  per  centum 
per  annum  from  the  expiration  of  such  thir 
ty  days’  period  until  paid,  and  the  amount 
of  such  excess  shall  be  a  lien  upon  the  en¬ 
tire  gross  estate,  except  such  part  thereof  as 
may  have  been  sold  to  a  bona  fide  purchaser 
for  a  fair  consideration  in  money  or 
money’s  worth. 

Receipts. 

The  collector  shall  grant  to  the  person 
paying  the  tax  duplicate  receipts,  either  of 
which  shall  be  sufficient  evidence  of  such 
payment,  and  shall  entitle  the  executor  to  be 
credited  and  allowed  the  amount  thereof  by 
any  court  having  jurisdiction  to  audit  or 
settle  his  accounts. 

Failure  to  Pay — Proceedings. 

Sec.  408.  That  if  the  tax  herein  imposed  is 
not  paid  within  180  days  after  it  is  due,  the 
collector  shall,  unless  there  is  reasonable 
cause  for  further  delay,  proceed  to  collect 
the  tax  under  the  provisions  of  general  law, 
or  commence  appropriate  proceedings  in 
any  court  of  the  United  States,  in  the  name 
of  the  United  States,  to  subject  the  property 
of  the  decedent  to  be  sold  under  the  judg¬ 
ment  or  decree  of  the  court.  From  the  pro¬ 
ceeds  of  such  sale  the  amount  of  the  tax,  to¬ 
gether  with  the  costs  and  expenses  of  every 
description  to  be  allowed  by  the  court,  shall 
be  first  paid,  and  the  balance  shall  be  de¬ 
posited  according  to  the  order  of  the  court, 
to  be  paid  under  its  direction  to  the  person 
entitled  thereto. 

Property  Passing  to  Person  Other  Than 
Executor — How  Computed. 

If  the  tax  or  any  part  thereof  is  paid  by, 
or  collected  out  of  that  part  of  the  estate 
passing  to  or  in  the  possession  of,  any  per¬ 
son  other  than  the  executor  in  his  capacity 
as  such,  such  person  shall  be  entitled  to  re¬ 
imbursement  out  of  any  part  of  the  estate 
still  undistributed  or  by  a  just  and  equitable 

—83— 


contribution  by  the  persons  whose  interest 
in  the  estate  of  the  decedent  would  have 
been  reduced  if  the  tax  had  been  paid  be¬ 
fore  the  distribution  of  the  estate  or  whose 
interest  is  subject  to  equal  or  prior  liability 
for  the  payment  of  taxes,  debts,  or  other 
charges  against  the  estate,  it  being  the  pur¬ 
pose  and  intent  of  this  title  that  so  far  as  is 
practicable  and  unless  otherwise  directed  by 
the  will  of  the  decedent  the  tax  shall  be  paid 
out  of  the  estate  before  its  distribution.  If 
any  part  of  the  gross  estate  consists  of  pro¬ 
ceeds  of  policies  of  insurance  upon  the  life 
of  the  decedent  receivable  by  a  beneficiary 
other  than  the  executor,  the  executor  shall  be 
entitled  to  recover  from  such  beneficiary 
such  portion  of  the  total  tax  paid  as  the 
proceeds,  in  excess  of  $40,000,  or  such  poli¬ 
cies  bear  to  the  net  estate.  If  there  is  more 
than  one  such  beneficiary  the  executor 
shall  be  entitled  to  recover  from  such  bene¬ 
ficiaries  in  the  same  ratio. 

Unpaid  Taxes  Lien  on  Gross  Estate. 

Sec.  409.  That  unless  the  tax  is  sooner 
paid  in  full,  it  shall  be  a  lien  for  ten  years 
upon  the  gross  estate  of  the  decedent,  ex¬ 
cept  that  such  part  of  the  gross  estate  as 
is  used  for  the  payment  of  charges  against 
the  estate  and  expenses  of  its  administra¬ 
tion,  allowed  by  any  court  having  jurisdic¬ 
tion  thereof,  shall  be  divested  of  such  lien. 
If  the  Commissioner  is  satisfied  that  the  tax 
liability  of  an  estate  has  been  fully  dis¬ 
charged  or  provided  for,  he  may,  under  reg¬ 
ulations  prescribed  by  him  with  the  ap¬ 
proval  of  the  Secretary,  issue  his  certificate 
releasing  any  or  all  property  of  such  estate 
from  the  lien  herein  imposed. 

Transfer  by  Decedent. 

If  (a)  the  decedent  makes  a  transfer  of,  or 
creates  a  trust  with  respect  to,  any  property 
in  contemplation  of  or  intended  to  take  ef¬ 
fect  in  possession  or  enjoyment  at  or  after 
his  death  (except  in  the  case  of  a  bona  fide 
sale  for  a  fair  consideration  in  money  or 
money’s  worth)  or  (b)  if  insurance  passes 
under  a  contract  executed  by  the  decedent 
in  favor  of  a  specific  beneficiary,  and  if  in 


—84 


cither  case  the  tax  in  respect  thereto  is  not 
paid  when  due,  then  the  transferee,  trustee, 
or  beneficiary  shall  be  personally  liable  for 
such  tax,  and  such  property,  to  the  extent  of 
the  decedent’s  interest  therein  at  the  time  of 
such  transfer,  or  to  the  extent  of  such  bene¬ 
ficiary’s  interest  under  such  contract  of  in¬ 
surance,  shall  be  subject  to  a  like  lien  equal 
to  the  amount  of  such  tax.  Any  part  of  such 
property  sold  by  such  transferee  or  trustee 
to  a  bona  fide  purchaser  for  a  fair  considera¬ 
tion  in  money  or  money’s  worth  shall  be  di¬ 
vested  of  the  lien  and  a  like  lien  shall  then 
attach  to  all  the  property  of  such  trans¬ 
feree  or  trustee,  except  any  part  sold  to  a 
bona  fide  purchaser  for  a  fair  consideration 
in  money  or  money’s  worth. 

False  Return — Penalty. 

Sec.  410.  That  whoever  knowingly  makes 
any  false  statement  in  any  notice  or  return 
required  to  be  filed  under  this  title  shall  be 
liable  to  a  penalty  of  not  exceeding  $5,000, 
or  imprisonment  not  exceeding  one  year,  or 
both. 

Withholding  Records,  Information,  Prop¬ 
erty — Penalty. 

Whoever  fails  to  comply  with  any  duty 
imposed  upon  him  by  section  404,  or,  having 
in  his  possession  or  control  any  record,  file, 
or  paper,  containing  or  supposed  to  contain 
any  information  concerning  the  estate  of 
the  decedent,  or,  having  in  his  possession  or 
control  any  property  comprised  in  the  gross 
estate  of  the  decedent,  fails  to  exhibit  the 
same  upon  request  to  the  Commissioner  or 
any  collector  or  law  officer  of  the  United 
States,  or  his  duly  authorized  deputy  or 
agent,  who  desires  to  examine  the  same  in 
the  performance  of  his  duties  under  this 
title,  shall  be  liable  to  a  penalty  of  not  ex¬ 
ceeding  $500,  to  be  recovered,  with  costs  of 
suit,  in  a  civil  action  in  the  name  of  the 
United  States. 

TITLE  V.— TAX  ON  .TRANSPORTA¬ 
TION  AND  OTHER  FACILITIES, 
AND  ON  INSURANCE. 

Sec.  500.  That  from  and  after  April  1, 
1919,  there  shall  be  levied,  assessed,  col- 

—85— 


% 

lected,  and  paid,  in  lieu  of  the  taxes  imposed 
by  section  500  of  the  Revenue  Act  of  1917 — 

Transportation. 

(a)  A  tax  equivalent  to  3  per  centum  of 
the  amount  paid  for  the  transportation  on 
or  after  such  date,  by  rail  or  water  or  by 
any  form  of  mechanical  motor  power  when 
in  competition  with  carriers  by  rail  or 
water,  of  property  by  freight  transported 
from  one  point  in  the  United  States  to  an¬ 
other;  and  a  like  tax  on  the  amount  paid 
for  such  transportation  within  the  United 
States  of  property  transported  from  a  point 
without  the  United  States  to  a  point  within 
the  United  States; 

(b)  A  tax  of  1  cent  for  each  20  cents  or 
fraction  thereof  of  the  amount  paid  to  any 
person  for  the  transportation  on  or  after 
such  date,  by  rail  or  water  or  by  any  form  of 
mechanical  motor  power  when  in  competi¬ 
tion  with  express  by  rail  or  water,  of  any 
package,  parcel,  or  shipment,  by  express, 
transported  from  one  point  in  the  United 
States  to  another;  and  a  like  tax  on  the 
amount  paid  for  such  transportation  within 
the  United  States  of  property  transported 
from  a  point  without  the  United  States  to  a 
point  within  the  United  States; 

(c)  A  tax  equivalent  to  8  per  centum  of 
the  amount  paid  for  the  transportation  on  or 
after  such  date  of  persons  by  rail  or  water, 
or  by  any  form  of  mechanical  motor  power 
on  a  regular  established  line  when  in  com¬ 
petition  with  carriers  by  rail  or  water,  from 
one  point  in  the  United  States  to  another  or 
to  any  point  in  Canada  or  Mexico,  where  the 
ticket  or  order  therefor  is  sold  or  issued  in 
the  United  States,  not  including  the  amount 
paid  for  commutation  or  season  tickets  for 
trips  less  than  thirty  miles,  or  for  transpor¬ 
tation  the  fare  for  which  does  hot  exceed  42 
cents :  Provided,  That  where  such  water 
transportation  lines  are  in  competition  be¬ 
tween  American  ports  with  foreign  water 
transportation  lines  from  adjacent  foreign 
ports,  the  tax  imposed  under  this  subdivi¬ 
sion  on  amounts  paid  for  water  transporta¬ 
tion  between  American  ports  shall  not  ex¬ 
ceed  the  amount  of  the  transportation  tax 

—86— 


to  which  such  foreign  water  transportation 
lines  are  subjected  by  their  government  cor¬ 
responding  to  this  tax: 

(d)  A  tax  equivalent  to  8  per  centum  of 
the  amount  paid  for  seats,  berths,  and  state¬ 
rooms  in  parlor  cars,  sleeping  cars,  or  on 
vessels,  used  on  or  after  such  date  in  con¬ 
nection  with  transportation  upon  which  tax 
is  imposed  by  subdivision  (c;  ; 

(e)  A  tax  equivalent  to  8  per  centum  of 
the  amount  paid  for  the  transportation  on 
or  after  such  date  of  oil  by  pipe  line; 

Telephone,  Telegraph,  Etc. 

(f)  In  the  case  of  each  telegraph,  tele¬ 
phone,  cable,  or  radio,  dispatch,  message,  or 
conversation,  which  originates  on  or  after 
such  date  within  the  United  States,  and  for 
the  transmission  of  which  the  charge  is 
more  than  14  cents  and  not  more  than  50 
cents,  a  tax  of  5  cents;  and  if  the  charge  is 
more  than  50  cents,  a  tax  of  10  cents :  Pro¬ 
vided,  That  only  one  payment  of  such  tax 
shall  be  required,  notwithstanding  the  lines 
or  stations  of  one  or  more  persons  are  used 
for  the  transmission  of  such  dispatch,  mes¬ 
sage,  or  conversation ;  and 

(g)  A  tax  equivalent  to  10  per  centum  of 
the  amount  paid  after  such  date  to  any  tele¬ 
graph  or  telephone  company  for  any  leased 
wire  or  talking  circuit  special  service  fur¬ 
nished  after  such  date.  This  subdivision 
shall  not  apply  to  the  amount  paid  for  so 
much  of  such  service  as  is  utilized  (1)  in  the 
collection  and  dissemination  of  news 
through  the  public  press,  or  (2)  in  the  con¬ 
duct.  by  a  common  carrier  or  telegraph  or 
telephone  company,  of  its  business  as  such. 

Exemptions. 

(h)  No  tax  shall  be  imposed  under  this 
section  upon  any  payment  received  for  serv¬ 
ices  rendered  to  the  United  States  or  to  any 
State  or  Territory  or  the  District  of  Colum¬ 
bia.  The  right  to  exemption  under  this 
subdivision  shall  be  evidenced  in  such  man¬ 
ner  as  the  Commissioner,  with  the  approval 
of  the  Secretary,  may  by  regulation  pre¬ 
scribe. 


—87— 


By  Whom  Paid. 

Sec.  501.  (a)  That  the  taxes  imposed  by 
section  500  shall  be  paid  by  the  person  pay¬ 
ing  for  the  services  or  facilities  rendered. 

Mileage  Books. 

(b)  If  a  mileage  book  used  for  transpor¬ 
tation  or  accommodation  was  purchased  be¬ 
fore  November  1,  1917,  or  if  cash  fare  is 
paid,  the  tax  imposed  by  section  500  shall  be 
collected  from  the  person  presenting  the 
mileage  book,  or  paying  the  cash  fare,  by 
the  conductor  or  other  agent,  when  pre¬ 
sented  for  such  transportation  or  accommo¬ 
dation,  and  the  amount  so  collected  shall  be 
paid  to  the  United  States  in  such  manner 
and  at  such  times  as  the  Commissioner,  with 
the  approval  of  the  Secretary,  may  pre¬ 
scribe  ;  if  a  ticket  (other  than  a  mileage 
book)  was  bought  and  partially  used  before 
November  1,  1917,  it  shall  not  be  taxed, 
but  if  bought  but  not  so  used  before  section 
500  takes  effect,  it  shall  not  be  valid  for 
passage  until  the  tax  has  been  paid  and 
such  payment  evidenced  on  the  ticket  in 
such  manner  as  the  Commissioner,  with  the 
approval  of  the  Secretary,  may  by  regula¬ 
tion  prescribe. 

When  Applied. 

(c)  The  taxes  imposed  by  section  500 
shall  apply  to  all  services  or  facilities  spe¬ 
cified  in  such  section  when  rendered  for 
hire,  whether  or  not  the  agency  rendering 
them  is  a  common  carrier.  In  case  a  carrier 
(other  than  a  pipe  line)  principally  engaged 
in  rendering  transportation  services  or  fa¬ 
cilities  for  hire  does  not,  because  of  its 
ownership  of  the  goods  transported,  or  for 
any  other  reason,  receive  the  amount  which 
as  a  carrier  it  would  otherwise  charge,  such 
carrier  shall  pay  a  tax  equivalent  to  the  tax 
which  would  be  imposed  upon  the  transpor¬ 
tation  of  such  goods  if  the  carrier  received 
payment  for  such  transportation,  such  tax, 
if  it  can  not  be  computed  trom  actual  rates 
or  tariffs  of  the  carrier,  to  be  computed  on 
the  basis  of  the  rates  or  tariffs  of  other  car¬ 
riers  for  like  services  as  determined  by  the 

—88— 


Commissioner.  In  the  case  of  any  carrier 
(other  than  a  pipe  line)  the  principal  busi¬ 
ness  of  which  is  to  transport  goods  belong¬ 
ing  to  it  on  its  own  account  and  which  only 
incidentally  renders  services  for  hire,  the 
tax  shall  apply  to  such  services  or  facilities 
only  as  are  actually  rendered  by  it  for  hire. 
Nothing  in  thisor  the  preceding  section  shall 
be  construed  as  imposing  a  tax  (1)  upon  the 
transportation  of  any  commodity  which  is 
necessary  for  the  use  of  the  carrier  in  the 
conduct  of  its  business  as  such  and  is  in¬ 
tended  to  be  so  used  or  has  been  so  used;  or 
(2)  upon  the  transportation  of  company 
material  transported  by  one  carrier,  which 
constitutes  a  part  of  a  railroad  system,  for 
another  carrier  which  is  also  a  part  of  the 
same  system. 


Transportation  by  Pipe  Line. 

(d)  The  tax  imposed  by  subdivision  (e) 
of  section  500  shall  apply  to  all  transporta¬ 
tion  of  oil  by  pipe  line.  In  case  no  charge 
for  transportation  is  made,  by  reason  of 
ownership  of  the  commodity  transported,  or 
for  any  other  reason,  the  person  transport¬ 
ing  by  pipe  line  shall  pay  a  tax  equivalent 
to  the  tax  which  would  be  imposed  if  such 
person  received  payment  for  such  transpor¬ 
tation,  and  if  the  tax  can  not  be  computed 
from  actual  bona  fide  rates  or  tariffs,  it  shall 
be  computed  (1)  on  the  basis  of  the  rates  or 
tariffs  of  other  pipe  lines  for  like  services, 
as  determined  by  the  Commissioner,  or  (2) 
if  no  such  rates  or  tariffs  exist,  on  the  basis 
of  a  reasonable  charge  for  such  transporta¬ 
tion,  as  determined  by  the  Commissioner. 


By  Whom  Collected — Returns  and  Pay¬ 
ments  Monthly — Refunds. 

Sec.  502.  That  each  person  receiving  any 
payments  referred  to  in  section  500  shall 
collect  the  amount  of  the  tax,  if  any,  im¬ 
posed  by  such  section  from  the  person  mak¬ 
ing  such  payments,  and  shall  make  monthly 
returns  under  oath,  in  duplicate,  and  pay  the 
taxes  so  collected  and  the  taxes  imposed 
upon  it  under  subdivision  (c)  or  (d)  of  sec¬ 
tion  501  to  the  collector  of  the  district  in 
which  the  principal  office  or  place  of  busi¬ 
ness  is  located. 


—89— 


No  carrier  collecting  the  taxes  imposed  by 
subdivision  (a)  or  (b)  of  section  500  shall 
be  required  to  list  the  amount  of  such  tax 
separately  in  any  bill  of  lading,  freight  or 
express  receipt,  or  other  similar  document, 
if  the  total  amount  of  the  transportation 
charge  and  the  tax  is  stated  therein. 

Any  person  making  a  refund  of  any  pay¬ 
ment  upon  which  tax  is  collected  under  this 
section  may  repay  therewith  the  amount  of 
the  tax  collected  on  such  payment ;  and  the 
amount  so  repaid  may  be  credited  against 
amounts  included  in  any  subsequent  month¬ 
ly  return. 

The  returns  required  under  this  section 
shall  contain  such  information,  and  be  made 
at  such  times  and  in  such  manner,  as  the 
Commissioner,  with  the  approval  of  the 
Secretary,  may  by  regulation  prescribe. 

Delayed  Payment  Penalty. 

The  tax  shall,  without  assessment  by  the 
Commissioner  or  notice  from  the  collector, 
be  due  and  payable  to  the  collector  at  the 
time  so  fixed  for  filing  the  return.  If  the 
tax  is  not  paid  when  due,  there  shall  be 
added  as  part  of  the  tax  a  penalty  of  5  per 
centum,  together  with  interest  at  the  rate  of 
1  per  centum  for  each  full  month,  from  the 
time  when  the  tax  became  due. 

Insurance  Rates. 

Sec.  503.  That  from  and  after  April  1, 
1919,  there  shall  be  levied,  assessed,  col¬ 
lected,  and  paid,  in  lieu  of  the  taxes  imposed 
by  section  504  of  the  Revenue  Act  of  1917, 
the  following  taxes  on  the  issuance  of  in¬ 
surance  policies,  including,  in  the  case  of 
policies  issued  outside  the  United  States 
(except  those  taxable  under  subdivision  15 
of  Schedule  A  of  Title  XI),  their  delivery 
within  the  United  States  by  any  agent  or 
broker,  whether  acting  for  the  insurer  or 
the  insured ;  such  taxes  to  be  paid  by  the 
insurer,  or  by  such  agent  or  broker: 

(a)  Life  insurance:  A  tax  equivalent  to 
8  cents  on  each  $100  or  fractional  part 
thereof  of  the  amount  for  which  any  life  is 
insured  under  any  policy  of  insurance,  or 
other  instrument,  by  whatever  name  the 
same  is  called :  Provided,  That  on  all  poli- 

— 90 — 


cies  for  life  insurance  only  by  which  a  life 
is  insured  not  in  excess  of  $500,  issued  on 
the  industrial  or  weekly  or  monthly  pay¬ 
ment  plan  of  insurance,  the  tax  shall  be 
40  per  centum  of  the  amount  of  the  first 
weekly  premium  or  20  per  centum  of 
the  amount  of  the  first  monthly  premium, 
as  the  case  may  be :  Provided,  fur¬ 
ther,  That  on  policies  of  group  life  insur¬ 
ance,  covering  groups  of  not  less  than  25 
lives  in  the  employ  of  the  same  person,  for 
the  benefit  of  persons  other  than  the  em¬ 
ployer,  the  tax  shall  be  equivalent  to  4 
cents  on  each  $100  of  the  aggregate  amount 
for  which  the  group  policy  is  issued  and  of 
any  net  increase  in  the  amount  of  the  in¬ 
surance  under  such  policy:  And  provided 
further,  That  on  all  policies  covering  life, 
health,  and  accident  insurance  combined  in 
one  policy  by  which  a  life  is  insured  not  in 
excess  of  $500,  issued  on  the  industrial,  or 
weekly  or  monthly  payment  plan  of  insur¬ 
ance,  the  tax  shall  be  40  per  centum  of  the 
amount  of  the  first  weekly  premium  or  20 
per  centum  of  the  amount  of  the  first 
monthly  premium,  as  the  case  may  be; 

(b)  Marine,  inland,  and  fire  insurance:  A 
tax  equivalent  to  1  cent  on  each  dollar  or 
fractional  part  thereof  of  the  premium 
charged  under  each  policy  of  insurance  or 
other  instrument  by  whatever  name  the 
same  is  called  whereby  insurance  is  made 
or  renewed  upon  property  of  any  descrip¬ 
tion  (including  rents  or  profits),  whether 
against  peril  by  sea  or  inland  waters,  or 
by  fire  or  lightning,  or  other  peril ; 

(c)  Casualty  insurance:  A  tax  equiv¬ 
alent  to  1  cent  on  each  dollar  or  fractional 
part  thereof  of  the  premium  charged  under 
each  policy  of  insurance  or  obligation  of 
the  nature  of  indemnity  for  loss,  damage, 
or  liability  (except  bonds  and  policies  tax¬ 
able  under  subdivision  2  of  schedule  A  of 
Title  XI)  issued  or  executed  or  renewed  by 
any  person  transacting  the  business  of  em¬ 
ployer’s  liability,  workmen’s  compensation, 
accident,  health,  tornado,  plate  glass,  steam 
boiler,  elevator,  burglary,  automatic  sprink¬ 
ler,  automobile,  or  other  branch  of  insur¬ 
ance  (except  life  insurance,  and  insurance 
described  and  taxed  in  the  preceding  subdi- 

—91— 


vision)  :  Provided,  That  in  case  of  policies 
of  insurance  issued  on  the  industrial  or 
weekly  or  monthly  payment  plan  the  tax 
shall  be  40  per  centum  of  the  amount  of  the 
first  weekly  premium  or  20  per  centum  of 
the  amount  of  the  first  monthly  premium, 
as  the  case  may  be; 

Exemptions. 

(d)  Policies  issued  by  any  corporation 
enumerated  in  section  231,  and  policies  of 
reinsurance,  shall  be  exempt  from  the  taxes 
imposed  by  this  section. 

Returns. 

Sec.  504.  That  every  person  issuing  poli¬ 
cies  of  insurance  upon  the  issuance  of  which 
a  tax  is  imposed  by  section  503  shall  make 
monthly  returns  under  oath,  in  duplicate, 
and  pay  such  tax  to  the  collector  of  the  dis¬ 
trict  in  which  the  principal  office  or  place 
of  business  of  such  person  is  located.  Such 
returns  shall  contain  such  information  and 
be  made  at  such  times  and  in  such  manner 
as  the  Commissioner,  with  the  approval  of 
the  Secretary,  may  by  regulation  prescribe. 

Delayed  Payment  Penalty. 

The  tax  shall,  without  assessment  by  the 
Commissioner  or  notice  from  the  collector, 
be  due  and  payable  to  the  collector  at  the 
time  so  fixed  for  filing  the  return.  If  the 
tax  is  not  paid  when  due,  there  shall  be 
added  as  part  of  the  tax  a  penalty  of  5  per 
centum,  together  with  interest  at  the  rate 
of  1  per  centum  for  each  full  month,  from 
the  time  when  the  tax  became  due. 

TITLE  VI. — TAX  ON  BEVERAGES. 

Distilled  Spirits. 

Sec.  600.  (a)  That  there  shall  be  levied 
and  collected  on  all  distilled  spirits  now  in 
bond  or  that  have  been  or  that  may  be  here¬ 
after  produced  in  or  imported  into  the 
United  States,  except  such  distilled  spirits 
as  are  subject  to  the  tax  provided  in  section 
604,  in  lieu  of  the  internal-revenue  taxes 
now  imposed  thereon  by  law,  a  tax  of  $2.20 
(or,  if  withdrawn  for  beverage  purposes  or 
for  use  in  the  manufacture  or  production 

—92— 


of  any  article  used  or  intended  for  use  as  a 
beverage,  a  tax  of  $6.40)  on  each  proof  gal¬ 
lon,  or  wine  gallon  when  below  proof,  and 
a  proportionate  tax  at  a  like  rate  on  all  frac¬ 
tional  parts  of  such  proof  or  wine  gallon, 
to  be  paid  by  the  distiller  or  importer  when 
withdrawn,  and  collected  under  the  pro¬ 
visions  of  existing  law. 

Taxes  Not  Due  or  Payable  During  Period 

of  Prohibition. 

(b)  That  the  tax  imposed  by  subdivision 
(a)  on  distilled  spirits  intended  for  bever¬ 
age  purposes  shall  not  be  due  or  payable  on 
such  spirits  while  stored  in  any  distillery, 
bonded  warehouse,  or  special  or  general 
bonded  warehouse,  and  which,  pursuant  to 
any  Act  of  Congress  or  proclamation  of  the 
President  of  the  United  States,  can  not  be 
lawfully  sold  or  removed  from  any  such 
warehouse  during  the  period  of  prohibition 
fixed  by  such  Act  or  proclamation ;  and  all 
warehousing  bonds  or  transportation  and 
warehousing  bonds  conditioned  for  the  pay¬ 
ment  of  tax  on  any  such  spirits  so  stored 
on  the  date  such  prohibition  takes  effect 
shall  as  to  all  such  spirits  actually  so  stored 
be  canceled  and  discharged,  provided  the 
distiller  of  such  spirits  shall  in  lieu  of  such 
bonds  and  prior  to  their  cancellation  exe¬ 
cute  a  bond  in  a  penal  sum  of  not  less  than 
$10,000,  with  sureties  satisfactory  to  the  col¬ 
lector  of  the  district,  conditioned  that  the 
principal  shall,  during  the  period  of  such 
prohibition,  safely  keep  or  cause  to  be  kept 
in  good  condition  all  such  spirits  and  the 
warehouse  in  which  the  same  are  stored, 
and  shall  not  remove  or  suffer  to  be  re¬ 
moved  from  warehouse,  contrary  to  law, 
any  such  spirits  during  the  period  of  such 
prohibition;  and  the  bond  herein  prescribed 
shall  be  in  such  further  sum  and  shall  con¬ 
tain  such  further  conditions  as  the  Commis¬ 
sioner,  with  the  approval  of  the  Secretary, 
may  by  regulations  require.  The  distiller 
may,  subject  to  the  provisions  of  this  sec¬ 
tion,  be  permitted  to  retain  in  any  such 
bonded  warehouse  distilled  spirits  on  which, 
under  the  terms  of  any  existing  bond,  the 
tax  imposed  thereon  becomes  due  and  pay¬ 
able  prior  to  the  date  such  prohibition  takes 

—93— 


effect :  Provided,  That  on  the  removal  of 
such  prohibition  the  distiller  shall,  as  to  all 
spirits  as  to  which  the  bonded  period  fixed 
by  law  has  not  expired  and  which  remain 
stored  in  warehouse,  execute  new  and  satis¬ 
factory  bond  in  the  form  required  by  exist¬ 
ing  law,  conditioned  for  the  payment  of  the 
tax  on  all  such  spirits;  and  all  provisions  of 
existing  law  relating  to  such  bonded  ware¬ 
houses,  or  the  storage  of  spirits  therein,  or 
to  the  execution  of  new  or  additional  bonds, 
so  far  as  applicable,  shall  continue  in  force 
as  to  all  distilled  spirits  rebonded  under  the 
provisions  of  this  section. 

After  Prohibition  Period. 

Upon  the  withdrawal  of  distilled  spirits 
from  bonded  warehouse,  after  the  period  of 
prohibition  has  ended,  and  under  the  condi¬ 
tions  imposed  by  section  50  of  an  Act  en¬ 
titled  “An  Act  to  reduce  taxation,  to  provide 
revenue  for  the  support  of  the  Government, 
and  for  other  purposes,”  approved  August 
28,  1894,  an  allowance  for  loss  by  leakage  or 
other  unavoidable  cause,  not  exceeding  one 
proof  gallon  as  to  packages  of  a  capacity  of 
not  less  than  40  wine  gallons,  may  be  made 
in  addition  to  that  provided  in  said  section 
50,  as  amended ;  and  a  like  additional  allow¬ 
ance  of  one  proof  gallon  as  to  each  package 
withdrawn  may  be  made  for  each  period 
of  four  months,  or  fraction  thereof,  for  such 
spirits  as  shall  have  remained  in  warehouse 
during  the  period  of  prohibition  and  after 
the  expiration  of  the  maximum  leakage  pe¬ 
riod  fixed  by  that  section. 

Distilled  Spirits,  Etc.,  in  Warehouse  When 

Prohibition  Takes  Effect. 

Under  regulations  prescribed  by  the  Sec¬ 
retary,  any  imported  distilled  spirits,  wines 
or  other  liquors  which  may  be  in  any  cus¬ 
toms  bonded  warehouse  under  the  customs 
laws  on  the  date  such  prohibition  takes  ef¬ 
fect  shall  be  permitted  to  remain  therein 
without  payment  of  any  taxes  or  duties 
thereon,  beyond  the  three-year  period  pro¬ 
vided  in  section  2971  of  the  Revised  Stat¬ 
utes,  during  such  period  of  prohibition ;  and 
may  be  exported  at  any  time  during  such 
extended  period.  Any  imported  spirits,  wines 


—94 


or  other  liquors  as  to  which  the  three-year 
bonded  period  may  expire  after  the  passage 
of  this  Act  and  prior  to  the  date  such  pro¬ 
hibition  takes  effect  may  at  the  option  of 
the  owner  remain  in  bond  during  such  pe¬ 
riod  of  prohibition. 

Perfumes. 

(c)  In  lieu  of  the  internal-revenue  tax 
now  imposed  thereon  by  law  there  shall  be 
levied  and  collected  upon  all  perfumes  here¬ 
after  imported  into  the  United  States  con¬ 
taining  distilled  spirits,  a  tax  of  $1.10  per 
wine  gallon,  and  a  proportionate  tax  at  a 
like  rate  on  all  fractional  parts  of  such  wine 
gallon.  Such  tax  shall  be  collected  by  the  col¬ 
lector  of  customs  and  deposited  as  internal- 
revenue  collections,  under  such  rules  and 
regulations  as  the  Commissioner,  with  the 
approval  of  the  Secretary,  may  prescribe. 

Importation  of  Spirits  from  Virgin  Islands, 
Porto  Rico  and  Philippines. 

Sec.  601.  That  no  distilled  spirits  pro¬ 
duced  after  October  3,  1917,  shall  be  im¬ 
ported  into  the  United  States  from  any  for¬ 
eign  country,  or  from  the  Virgin  Islands 
(unless  produced  from  products  the  growth 
of  such  islands,  and  not  then  into  any  State 
or  Territory  or  District  of  the  United  States 
in  which  the  manufacture  or  sale  of  intoxi¬ 
cating  liquor  is  prohibited),  or  from  Porto 
Rico,  or  the  Philippine  Islands.  Under 
such  rules,  regulations,  and  bonds  as  the 
Secretary  may  prescribe,  the  provisions  of 
this  section  shall  not  apply  to  distilled 
spirits  imported  for  other  than  (1)  beverage 
purposes  or  (2)  use  in  the  manufacture  or 
production  of  any  article  used  or  intended 
for  use  as  a  beverage. 

Transfer  of  Spirits. 

Sec.  602.  That  at  registered  distilleries 
producing  alcohol,  or  other  high-proof 
spirits,  packages  may  be  filled  with  such 
spirits  reduced  to  not  less  than  one  hundred 
proof  from  the  receiving  cisterns  and  tax 
paid  without  being  entered  into  bonded 
warehouse.  Such  spirits  may  be  also  trans¬ 
ferred  from  the  receiving  cisterns  at  such 
distilleries,  by  means  of  pipe  lines,  direct 

—95— 


to  storage  tanks  in  the  bonded  warehouse 
and  may  be  warehoused  in  such  storage 
tanks.  Such  spirits  may  be  also  transferred 
in  tanks  or  tank  cars  to  general  bonded 
warehouses  for  storage  therein,  either  in 
storage  tanks  in  such  warehouses  or  in  the 
tanks  in  which  they  were  transferred.  Such 
spirits  may  also  be  transferred  from  receiv¬ 
ing  cisterns  or  warehouse  storage  tanks  to 
barrels,  drums,  tanks,  tank  cars,  or  other 
approved  containers,  and  may  be  trans¬ 
ported  in  such  containers  for  exportation  or 
other  lawful  purposes.  The  Commissioner, 
with  the  approval  of  the  Secretary,  is  here¬ 
by  empowered  to  prescribe  all  necessary 
regulations  relating  to  the  drawing  off, 
transferring,  gauging,  storing,  and  trans¬ 
porting  of  such  spirits ;  the  records  to  be 
kept  and  returns  to  be  made;  the  size  and 
kind  of  packages  and  tanks  to  be  used ;  the 
marking,  branding,  numbering,  and  stamp¬ 
ing  of  such  packages  and  tanks ;  the  kinds 
of  stamps,  if  any,  to  be  used;  and  the  time 
and  manner  of  paying  the  tax;  the  kind  of 
bond  and  the  penal  sum  of  same.  The  tax 
prescribed  by  law  must  be  paid  before  such 
spirits  are  removed  from  the  distillery  prem¬ 
ises,  or  from  general  bonded  warehouse  in 
the  case  of  spirits  transferred  thereto,  ex¬ 
cept  as  otherwise  provided  by  law. 

Under  such  regulations  as  the  Commis¬ 
sioner,  with  the  approval  of  the  Secretary, 
may  prescribe,  distilled  spirits  may  here¬ 
after  be  drawn  from  receiving  cisterns  and 
deposited  in  distillery  warehouses  without 
having  affixed  to  the  packages  containing 
the  same,  distillery  warehouse  stamps,  and 
such  packages,  when  so  deposited  in  ware¬ 
house,  may  be  withdrawn  therefrom  on  the 
original  gauge  where  the  same  have  re¬ 
mained  in  such  warehouse  for  a  period  not 
exceeding  thirty  days  from  the  date  of  de¬ 
posit. 

Ethyl  Alcohol  Excepted. 

Under  such  regulations  as  the  Commis¬ 
sioner,  with  the  approval  of  the  Secretary, 
may  prescribe,  the  manufacture,  warehous¬ 
ing,  withdrawal,  and  °Mpment,  under  the 
provisions  of  existing  law,  of  ethyl  alcohol 
for  other  than  (1)  beverage  purposes  or  (2) 
use  in  the  manufacture  or  production  of  any 

—96— 


article  used  or  intended  for  use  as  a  bever¬ 
age,  and  denatured  alcohol,  may  be  ex¬ 
empted  from  the  provisions  of  section  3283 
of  the  Revised  Statutes. 

The  Commissioner,  with  the  approval  of 
the  Secretary,  may  by  regulations  exempt 
distillers  of  ethyl  alcohol,  for  use  in  the  pro¬ 
duction  of  munitions  of  war,  or  for  other 
nonbeverage  purposes,  from  so  much  of  the 
provisions  of  sections  3264,  3285,  or  3309  of 
the  Revised  Statutes,  and  Acts  amendatory 
thereof,  respecting  the  survey  of  distilleries, 
the  period  of  fermentation,  the  filling  and 
emptying  of  fermenting  tubs,  and  assess¬ 
ments,  as,  in  his  judgment,  may  be  expe¬ 
dient:  Provided,  That  the  bond  prescribed 
in  section  3260  of  the  Revised  Statutes  shall, 
in  the  cases  herein  provided,  be  in  such  sum 
and  contain  such  further  conditions  as  the 
Commissioner  may  require. 

Removal  of  Ethyl  Alcohol. 

Sec.  603.  That  under  such  regulations  as 
the  Commissioner,  with  the  approval  of  the 
Secretary,  may  prescribe,  ethyl  alcohol  of 
not  less  than  180  degrees  proof,  produced  at 
any  central  distilling  and  denaturing  plant 
established  under  the  provisions  of  subsec¬ 
tion  2,  paragraph  N,  of  section  IV  of  the 
Act  entitled  “An  Act  to  reduce  tariff  duties 
and  to  provide  revenue  for  the  Government, 
and  for  other  purposes/’  approved  October 
3,  1913,  may  be  removed  from  such  plant  to 
any  central  denaturing  bonded  warehouse 
for  denaturation,  or  may,  before  or  after  de- 
naturation,  be  removed  from  such  plant  or 
from  such  denaturing  bonded  warehouse, 
free  of  tax,  for  use  of  the  United  States  or 
for  shipment  to  any  nation  while  engaged 
against  the  German  Government  in  the 
present  war  and  the  removal  herein  author¬ 
ized  may  be  made  in  such  tank  vessels,  tank 
cars,  drums,  casks,  or  other  containers  as 
may  be  approved  by  the  Commissioner.  It 
shall  be  lawful,  under  regulations  prescribed 
by  the  Commissioner,  with  the  approval  of 
the  Secretary,  for  an  allowance  to  be  made 
for  leakage  or  loss  by  unavoidable  accident 
and  without  fault  or  negligence  of  the  dis¬ 
tiller,  owner,  carrier,  or  his  agent  or  em¬ 
ployees,  which  may  occur  during  the  trans- 

—97— 


portation  of  such  spirits  or  while  the  same 
are  lawfully  stored  on  either  of  the  premises 
herein  described. 

Floor  Tax  on  Distilled  Spirits. 

Sec.  604.  That  upon  all  distilled  spirits 
produced  in  or  imported  into  the  United 
States  upon  which  the  internal-revenue  tax 
now  imposed  by  law  has  been  paid,  and 
which,  on  the  day  after  the  passage  of  this 
Act,  are  held  by  any  person  and  intended  for 
sale  or  for  use  in  the  manufacture  or  pro¬ 
duction  of  any  article  intended  for  sale, 
there  shall  be  levied,  assessed,  collected,  and 
paid  a  floor  tax  of  $3.20  (if  intended  for  sale 
for  beverage  purposes  or  for  use  in  the 
manufacture  or  production  of  any  article 
used  or  intended  for  use  as  a  beverage)  on 
each  proof  gallon,  and  a  proportionate  tax 
at  a  like  rate  on  all  fractional  parts  of  such 
proof  gallon. 


Rectified  Spirits. 

Sec.  605.  That  in  addition  to  the  tax  im¬ 
posed  by  this  Act  on  distilled  spirits  and 
wines,  there  shall  be  levied,  assessed,  col¬ 
lected,  and  paid,  in  lieu  of  the  tax  imposed 
by  section  304  of  the  Revenue  Act  of  1917, 
a  tax  of  30  cents  on  each  proof  gallon  and  a 
proportionate  tax  at  a  like  rate  on  all  frac¬ 
tional  parts  of  such  proof  gallon  on  all  dis¬ 
tilled  spirits  or  wines  hereafter  rectified, 
purified,  or  refined  in  such  manner,  and  on 
all  mixtures  hereafter  ~  produced  in  such 
manner,  that  the  person  so  rectify¬ 
ing,  purifying,  refining,  or  mixing  the  same 
is  a  rectifier  within  the  meaning  of  section 
3244  of  the  Revised  Statutes,  as  amended : 
Provided,  That  this  tax  shall  not  apply  to 
gin  produced  by  the  redistillation  of  a  pure 
spirit  over  juniper  berries  and  other  aro¬ 
matics. 

Floor  Tax. 

Upon  all  such  articles  heretofore  pro¬ 
duced,  and  which  on  the  day  after  the  pas¬ 
sage  of  this  Act  are  held  by  any  person  and 
intended  for  sale,  there  shall  be  levied,  as-  I 
sessed,  collected,  and  paid  a  floor  tax  of  15 
cents  on  each  proof  gallon,  and  a  propor¬ 
tionate  tax  at  a  like  rate  on  all  fractional 


—98— 


parts  of  each  proof  gallon ;  and  all  such 
distilled  spirits  so  held  and  not  contained  in 
the  distillers’  original  stamped  packages,  or 
in  bottles  or  other  containers  bearing  the 
distillers’  original  labels,  shall  for  the  pur¬ 
pose  of  this  section  be  regarded  as  rectified 
spirits. 

When  the  process  of  rectification  is  com¬ 
pleted  and  the  taxes  prescribed  by  this  sec¬ 
tion  have  been  paid,  it  shall  be  unlawful  for 
the  rectifier  or  other  dealer  to  reduce  in  proof 
or  increase  in  volume  such  spirits  or  wine 
by  the  addition  of  water  or  other  substance; 
nothing  herein  contained  shall,  however, 
prevent  a  rectifier  from  using  again  in  the 
process  of  rectification  spirits  already  recti¬ 
fied  and  upon  which  the  taxes  have  there¬ 
tofore  been  paid. 

Cordials  or  Liqueurs. 

The  taxes  imposed  by  this  section  shall 
lot  attach  to  cordials  or  liqueurs  on  which 
i  tax  is  imposed  and  paid  under  section  611 
3r  613,  nor  to  the  mixing  and  blending  of 
►vines,  where  such  blending  is  for  the  sole 
purpose  of  perfecting  such  wines  accord- 
ng  to  commercial  standards,  nor  to  blends 
nade  exclusively  of  two  or  more  pure 
straight  whiskies  aged  in  wood  for  a  period 
lot  less  than  four  years  and  without  the 
iddition  of  coloring  or  flavoring  matter  or 
my  other  substance  than  pure  water  and 
f  not  reduced  below  ninety  proof :  Pro - 
'ided,  That  such  blended  whiskies  shall  be 
■xempt  from  tax  under  this  section  only 
vlien  compounded  under  the  immediate 
upervision  of  a  revenue  officer,  in  such 
anks  and  under  such  conditions  and  super- 
ision  as  the  Commissioner,  with  the  ap- 
>roval  of  the  Secretary,  may  prescribe. 

All  distilled  spirits  or  wines  taxable  un- 
ler  this  section  shall  be  subject  to  uniform 
egulations  concerning  the  use  thereof  in 
he  manufacture,  blending,  compounding, 
;.i  nixing,  marking,  branding,  and  sale  of 
5  vhisky  and  rectified  spirits,  and  no  discrim- 
nation  whatsoever  shall  be  made  by  reason 
f  a  difference  in  the  character  of  the  ma- 


—99— 


terial  from  which  same  may  have  been  pro¬ 
duced. 

Rectifier  of  Spirits.  | 

The  business  of  a  rectifier  of  spirits  shall  ; 
be  carried  on,  and  the  tax  on  rectified  spirits  j 
shall  be  paid,  under  such  rules,  regulations, 
and  bonds  as  may  be  prescribed  by  the 
Commissioner,  with  the  approval  of  the  Sec¬ 
retary. 

Penalty . 

Whoever  violates  any  of  the  provisions  off 
this  section  shall  be  deemed  to  be  guilty  of 
a  misdemeanor  and,  upon  conviction,  shall 
be  fined  not  more  than  $1,000  or  imprisoned 
not  more  than  two  years,  and  shall,  in  ad¬ 
dition,  be  liable  to  double  the  tax  evaded, 
together  with  the  tax,  to  be  collected  by  as-; 
sessment  or  on  any  bond  given. 

Stamps — Exchange  of — Discontinuance  of. 

Sec.  606.  That  hereafter  collectors  shall 
not  furnish  wholesale  liquor  dealer’s  stamps 
in  lieu  of  and  in  exchange  for  stamps  for 
rectified  spirits  unless  the  package  covered 
by  stamp  for  rectified  spirits  is  to  be  broken 
into  smaller  packages. 

The  Commissioner,  with  the  approval  of 
the  Secretary,  is  authorized  to  discontinue 
the  use  of  the  following  stamps  whenever  i 
in  his  judgment  the  interest  of  the  Govern¬ 
ment  will  be  subserved  thereby : 

Distillery  warehouse,  special  bonded 
warehouse,  special  bonded  rewarehouse,  • 
general  bonded  warehouse,  general  bonded 
retransfer,  transfer  brandy,  export  tobacco, 
export  cigars,  export  oleomargarine,  and  ex¬ 
port  fermented-liquor  stamps. 

Installation  of  Meters  and  Other  Apparatus 
for  Protection  of  Revenue. 

Sec.  607.  That  the  Commissioner,  with 
the  approval  of  the  Secretary,  is  hereby  au¬ 
thorized  to  require  at  distilleries,  breweries, 
rectifying  houses,  and  wherever  else  in  his 
judgment  such  action  may  be  deemed  advis¬ 
able,  the  installation  of  meters,  tanks,  pipes,  : 
or  any  other  apparatus  for  the  purpose  of 
protecting  the  revenue,  and  such  meters, 
tanks,  and  pipes  and  all  necessary  labor  in- 

—100— 


cidcnt  thereto  shall  be  at  the  expense  of  the 
person  on  whose  premises  the  installation  is 
required.  Any  such  person  refusing  or 
neglecting  to  install  such  apparatus  when  so 
required  by  the  Commissioner  shall  not  be 
permitted  to  conduct  business  on  such 
premises. 

Fermented  Liquor  Tax. 

Sec.  608.  That  there  shall  be  levied  and 
collected  on  all  beer,  lager  beer,  ale,  porter, 
and  other  similar  fermented  liquor,  con¬ 
taining  one-half  of  one  per  centum,  or  more, 
of  alcohol,  brewed  or  manufactured  and 
hereafter  sold,  or  removed  for  consumption 
or  sale,  within  the  United  States,  by  what¬ 
ever  name  such  liquors  may  be  called,  in 
lieu  of  the  internal-revenue  taxes  now  im¬ 
posed  thereon  by  law,  a  tax  of  $6.00  for 
every  barrel  containing  not  more  than 
thirty-one  gallons,  and  at  a  like  rate  for  any 
other  quantity  or  for  the  fractional  parts  of 
a  barrel  authorized  and  defined  by  law,  to 
be  collected  under  the  provisions  of  existing 
law. 

Transfers  Between  Warehouses  or 

Breweries  Not  Taxable. 

Sec.  609.  That  from  and  after  the  pas¬ 
sage  of  this  Act  taxable  fermented  liquors 
may  be  conveyed  without  payment  of  tax 
from  the  brewery  premises  where  produced 
to  a  contiguous  industrial  distillery  of  either 
class  established  under  the  Act  entitled  “An 
Act  to  reduce  tariff  duties  and  to  provide 
revenue  for  the  Government,  and  for  other 
purposes,”  approved  October  3,  1913,  to  be 
used  as  distilling  material,  and  the  residue 
from  such  distillation,  containing  less  than 
one-half  of  1  per  centum  of  alcohol  by  vol¬ 
ume,  which  is  to  be  used  in  making  bever¬ 
ages,  may  be  manipulated  by  cooling,  fla¬ 
voring,  carbonating,  settling,  and  filtering 
on  the  distillery  premises  or  elsewhere. 

The  removal,  of  the  taxable  fermented 
liquor  from  the  brewery  to  the  distillery 
and  the  operation  of  the  distillery  and  re¬ 
moval  of  the  residue  therefrom  shall  be  un¬ 
der  the  supervision  of  such  officer  or  offi¬ 
cers  as  the  Commissioner  shall  deem  proper, 
and  the  Commissioner,  with  the  approval  of 
the  Secretary,  is  hereby  authorized  to  make 

—101— 


: 


such  regulations  from  time  to  time  as  may 
be  necessary  to  give  force  and  effect  to  this 
section  and  to  safeguard  the  revenue. 


Natural  Wine  Defined — Regulations. 

Sec.  610.  That  natural  wine  within  the 
meaning  of  this  Act  shall  be  deemed  to  be 
the  product  made  from  the  normal  alcoholic 
fermentation  of  the  juice  of  sound,  ripe 
grapes,  without  addition  or  abstraction,  ex¬ 
cept  such  as  may  occur  in  the  usual  cellar 
treatment  of  clarifying  and  aging:  Pro¬ 
vided,  however ,  That  the  product  made 
from  the  juice  of  sound,  ripe  grapes  by  com¬ 
plete  fermentation  of  the  must  under  proper 
cellar  treatment  and  corrected  by  the  ad¬ 
dition  (under  the  supervision  of  a  gauger 
or  storekeeper-gauger  in  the  capacity  of 
gauger)  of  a  solution  of  water  and  pure 
cane,  beet,  or  dextrose  sugar  (containing, 
respectively,  not  less  than  95  per  centum  of 
actual  sugar,  calculated  on  a  dry  basis)  to 
the  must  or  to  the  wine,  to  correct  natural 
deficiencies,  when  such  addition  shall  not 
increase  the  volume  of  the  resultant  product 
more  than  35  per  centum,  and  the  resultant 
product  does  not  contain  less  than  five  parts 
per  thousand  of  acid  before  fermentation 
and  not  more  than  13  per  centum  of  alcohol 
after  complete  fermentation,  shall  be 
deemed  to  be  wine  within  the  meaning  of 
this  Act,  and  may  be  labeled,  transported, 
and  sold  as  ‘‘wine,”  qualified  by  the  name 
of  the  locality  where  produced,  and  may 
be  further  qualified  by  the  name  of 
its  own  particular  type  or  variety:  And 
proinded  further,  That  wine  as  defined  in 
this  section  may  be  sweetened  with  cane 
sugar  or  beet  sugar  or  pure  condensed  grape 
must  and  fortified  under  the  provisions  of 
this  Act,  and  wines  so  sweetened  or  forti¬ 
fied  shall  be  considered  sweet  wine  within 
the  meaning  of  this  Act. 

I 

Still  Wines — Rates. 

Sec.  611.  That  upon  all  still  wines,  in¬ 
cluding  vermuth,  and  all  artificial  or  imita¬ 
tion  wines  or  compounds  sold  as  still  wine, 
which  are  hereafter  produced  in  or  imported 
into  the  United  States,  or  which  on  the  day 

—102— 


after  the  passage  of  this  Act  are  on  any 
winery  premises  or  other  bonded  premises 
or  in  transit  thereto  or  at  any  customhouse, 
there  shall  be  levied,  collected,  and  paid, 
in  lieu  of  the  internal-revenue  taxes  now  im¬ 
posed  thereon  by  law,  taxes  at  rates  as  fol¬ 
lows,  when  sold,  or  removed  for  consump¬ 
tion  or  sale : 

On  wines  containing  not  more  than  14 
per  centum  of  absolute  alcohol,  16  cents  per 
wine  gallon,  the  per  centum  of  alcohol  tax¬ 
able  under  this  section  to  be  reckoned  by 
volume  and  not  by  weight; 

On  wines  containing  more  than  14  per 
centum  and  not  exceeding  21  per  centum  of 
absolute  alcohol,  40  cents  per  wine  gallon; 

On  wines  containing  more  than  21  per 
centum  and  not  exceeding  24  per  centum  of 
absolute  alcohol,  $1  per  wine  gallon ; 

All  such  wines  containing  more  than  24 
per  centum  of  absolute  alcohol  by  volume 
shall  be  classed  as  distilled  spirits  and  shall 
pay  tax  accordingly. 

Grape  Brandy  or  Wine  Spirits  for 
Fortification. 

Sec.  612.  That  under  such  regulations 
and  official  supervision  and  upon  the  giving 
of  such  notices,  entries,  bonds,  and  other  se¬ 
curity  as  the  Commissioner,  with  the  ap¬ 
proval  of  the  Secretary,  may  prescribe,  any 
producer  of  wines  defined  under  the  pro¬ 
visions  of  this  title,  may  withdraw  from  any 
fruit  distillery  or  special  bonded  ware¬ 
house  grape  brandy,  or  wine  spirits,  for  the 
fortification  of  such  wines  on  the  premises 
where  actually  made :  Provided,  That  there 
shall  be  levied  and  assessed  against  the  pro¬ 
ducer  of  such  wines  a  tax  (in  lieu  of  the  in¬ 
ternal-revenue  tax  now  imposed  thereon  by 
law)  of  60  cents  per  proof  gallon  of  grape 
brandy  or  wine  spirits  whenever  withdrawn 
and  hereafter  so  used  by  him  in  the  fortifi¬ 
cation  of  such  wines  during  the  preceding 
month,  which  assessment  shall  be  paid  by 
him  within  ten  months  from  the  date  of  no¬ 
tice  thereof :  Proinded  further,  That  noth¬ 
ing  contained  in  this  section  shall  be  con¬ 
strued  as  exempting  any  wines,  cordials, 
liqueurs,  or  similar  compounds  from  the 

— 103— 


payment  of  any  tax  provided  for  in  this 
title. 

..  Other  Domestic  or  Imported  Spirits. 

Sec.  613.  That  upon  the  following  articles 
which  are  hereafter  produced  in  or  import¬ 
ed  into  the  United  States,  or  which  on  the 
day  after  the  passage  of  this  Act  are  on  any 
winery  premises  or  other  bonded  premises 
or  in  transit  thereto  or  at  any  customhouse, 
there  shall  be  levied,  collected,  and  paid 
taxes  at  rates  as  follows,  when  sold,  or  re¬ 
moved  for  consumption  or  sale : 

On  each  bottle  or  other  container  of 
champagne  or  sparkling  wine,  12  cents  on 
each  one-half  pint  or  fraction  thereof; 

On  each  bottle  or  other  container  of  arti¬ 
ficially  carbonated  -wine,  6  cents  on  each 
one-half  pint  or  fraction  thereof; 

On  each  'bottle  or  other  container  of 
liqueurs,  cordials,  or  similar  compounds,  by 
whatever  name  sold  or  offered  for  sale,  con¬ 
taining  sweet  wine  fortified  with  grape 
brandy,  6  cents  on  each  one-half  pint  or 
fraction  thereof. 

The  tax  imposed  by  this  section  shall,  in 
the  case  of  any  article  upon  which  a  corre¬ 
sponding  internal-revenue  tax  is  now  im¬ 
posed  by  law,  be  in  lieu  of  such  tax. 

Floor  Tax. 

Sec.  614.  That  upon  all  articles  specified 
in  section  611  or  613  upon  which  the  inter¬ 
nal-revenue  tax  now  imposed  by  law  has 
been  paid  and  which  are  on  the  day  after 
the  passage  of  this  Act  held  by  any  person 
and  intended  for  sale,  there  shall  be  levied, 
collected,  and  paid  a  floor  tax  equal  to  the 
difference  between  the  tax  imposed  by  this 
Act  and  the  tax  so  paid. 

Sec.  615.  That  upon  all  sweet  wines  held 
for  sale  by  the  producer  thereof  upon  the 
day  after  the  passage  of  this  Act  there  shall 
be  levied,  assessed,  collected,  and  paid  a 
floor  tax  equivalent  to  30  cents  per  proof 
gallon  upon  the  grape  brandy  or  wine  spirits 
used  in  the  fortification  of  such  wine. 

Removal  for  Sale — Stamp  Tax — Inventory 
— Marking — Labeling — Exceptions. 

Sec.  616.  That  the  taxes  imposed  by  sec¬ 
tion  611  or  613  shall  be  paid  by  stamp  on 

—104— 


removal  of  the  wines  from  the  customhouse, 
winery,  or  other  bonded  place  of  storage  for 
consumption  or  sale,  and  every  person  here¬ 
after  producing,  or  having  in  his  possession 
or  under  his  control  when  this  title  takes  ef¬ 
fect,  any  wines  subject  to  the  tax  imposed  in 
section  611  or  613  shall  file  such  notice,  de¬ 
scribing  the  premises  on  which  such  wines 
are  produced  or  stored;  shall  execute  a 
bond  in  such  form ;  shall  make  such  inven¬ 
tories  under  oath ;  and  shall,  prior  to  sale  or 
removal  for  consumption,  afiix  to  each  cask 
or  vessel  containing  such  wine  such  marks, 
labels,  or  stamps  as  the  Commissioner,  with 
the  approval  of  the  Secretary,  may  from 
time  to  time  prescribe;  and  the  premises  de¬ 
scribed  in  such  notice  shall,  for  the  purpose 
of  this  Act,  be  regarded  as  bonded  prem¬ 
ises.  But  the  provisions  of  this  section,  ex¬ 
cept  as  to  payment  of  tax  and  the  affixing 
of  the  required  stamps  or  labels,  shall  not 
apply  to  wines  held  by  retail  dealers,  as  de¬ 
fined  in  section  3244  of  the  Revised  Statutes, 
nor,  subject  to  regulations  prescribed  by  the 
Commissioner,  with  the  approval  of  the 
Secretary,  shall  the  tax  imposed  by  section 
611  apply  to  wines  produced  for  the  family 
use  of  the  duly  registered  producer  thereof 
and  not  sold  or  otherwise  removed  from  th° 
place  of  manufacture  and  not  exceeding  in 
any  case  two  hundred  gallons  per  year. 

Preparation  of  Sweet  Wines — Credits. 

Sec.  617.  That  sections  42,  43,  and  45  of 
the  Act  entitled  “An  Act  to  reduce  the  rev¬ 
enue  and  equalize  duties  on  imports,  and 
for  other  purposes,”  approved  October  1, 
1890,  as  amended  by  section  68  of  the  Act 
entitled  “An  Act  to  reduce  taxation,  io  pro¬ 
vide  revenue  for  the  Government,  and  for 
other  purposes,”  approved  August  27,  1894, 
are  further  amended  to  read  as  follows: 

“Sec.  42.  That  any  producer  of  pure 
sweet  wines  may  use  in  the  preparation  of 
such  sweet  wines,  under  such  regulations 
and  after  the  filing  of  such  notices  and 
bonds,  together  with  the  keeping  of  such 
records  and  the  rendition  of  such  reports  as 
to  materials  and  products  as  the  Commis¬ 
sioner  of  Internal  Revenue,  with  the  ap¬ 
proval  of  the  Secretary  of  the  Treasury, 

— 105- - 


may  prescribe,  wine  spirits  produced  by  any 
duly  authorized  distiller,  and  the  Commis¬ 
sioner  of  Internal  Revenue,  in  determining 
the  liability  of  any  distiller  of  wine  spirits 
to  assessment  under  section  3309  of  the  Re¬ 
vised  Statutes,  is  authorized  to  allow  such 
distiller  credit  in  his  computations  for  the 
wine  spirits  withdrawn  to  be  used  in  fortify¬ 
ing  sweet  wines  under  this  Act. 

Fortification  of  Wines. 

“Sec.  43.  That  the  wine  spirits  men¬ 
tioned  in  section  42  is  the  product  resulting 
from  the  distillation  of  fermented  grape 
juice,  to  which  water  may  have  been  added 
prior  to,  during,  or  after  fermentation,  for 
the  sole  purpose  of  facilitating  the  fermenta¬ 
tion  and  economical  distillation  there¬ 
of,  and  shall  be  held  to  include  the 
product  -from  grapes  or  their  residues 
commonly  known  as  grape  brandy,  and 
shall  include  commercial  grape  brandy 
which  may  have  been  colored  with 
burnt  sugar  or  caramel;  and  the  pure  sweet 
wine  which  may  be  fortified  with  wine 
spirits  under  the  provisions  of  this  Act  is 
fermented  or  partially  fermented  grape  juice 
only,  with  the  usual  cellar  treatment,  and 
shall  contain  no  other  substance  whatever 
introduced  before,  at  the  time  of,  or  after 
fermentation,  except  as  herein  expressly 
provided :  Provided,  That  the  addition  of 
pure  boiled  or  condensed  grape  must  or 
pure  crystallized  cane  or  beet  sugar,  or  pure 
dextrose  sugar  containing,  respectively,  not 
less  than  95  per  centum  of  actual  sugar,  cal¬ 
culated  on  a  dry  basis,  or  water,  or  any  or 
all  of  them,  to  the  pure  grape  juice  before 
fermentation,  or  to  the  fermented  product 
of  such  grape  juice,  or  to  both,  prior  to  the 
fortification  herein  provided  for,  either  for 
the  purpose  of  perfecting  sw^eet  wines  ac¬ 
cording  to  commercial  standards  or  for 
mechanical  purposes,  shall  not  be  excluded 
by  the  definition  of  pure  sweet  wine  afore¬ 
said  :  Provided,  however ,  That  the  cane  or 
beet  sugar,  or  pure  dextrose  sugar  added 
for  sweetening  purposes  shall  not  be  in  ex¬ 
cess  of  11  per  centum  of  the  weight  of  the 
wine  to  be  fortified:  And  provided  further, 
That  the  addition  of  water  herein  authorized 


—106— 


shall  be  under  such  regulations  as  the  Com¬ 
missioner  of  Internal  Revenue,  with  the  ap¬ 
proval  of  the  Secretary  of  the  Treasury, 
may  from  time  to  time  prescribe:  Pro¬ 
vided,  however ,  That  records  kept  in  accord¬ 
ance  with  such  regulations  as  to  the  percent¬ 
age  of  saccharine,  acid,  alcoholic,  and  added 
water  content  of  the  wine  offered  for  fortifi¬ 
cation  shall  be  open  to  inspection  by  any 
official  of  the  Department  of  Agriculture 
thereto  duly  authorized  by  the  Secretary  of 
Agriculture;  but  in  no  case  shall  such  wines 
to  which  water  has  been  added  be  eligible 
for  fortification  under  the  provisions  of  this 
Act,  where  the  same,  after  fermentation 
and  before  fortification,  have  an  alcoholic 
strength  of  less  than  5  per  centum  of  their 
volume. 

Withdrawal  of  Wine  Spirits. 

“Sec.  45.  That  under  such  regulations 
and  official  supervision,  and  upon  the  exe¬ 
cution  of  such  entries  and  the  giving  of 
such  bonds,  bills  of  lading,  and  other  secur¬ 
ity  as  the  Commissioner  of  Internal  Rev¬ 
enue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  shall  prescribe,  any  producer 
of  pure  sweet  wines  as  defined  by  this  Act 
may  withdraw  wine  spirits  from  any  special 
bonded  warehouse  in  original  packages  or 
from  any  registered  distillery  in  any  quan¬ 
tity  not  less  than  eighty  wine  gallons,  and 
may  use  so  much  of  the  same  as  may  be 
required  by  him  under  such  regulations, 
and  after  the  filing  of  such  notices  and 
bonds  and  the  keeping  of  such  records  and 
the  rendition  of  such  reports  as  to  mate¬ 
rials  and  products  and  the  disposition  of  the 
same  as  the  Commissioner  of  Internal  Rev¬ 
enue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  shall  prescribe,  in  fortifying 
the  pure  sweet  wines  made  by  him,  and  for 
no  other  purpose,  in  accordance  with  the 
foregoing  limitations  and  provisions;  and 
the  Commissioner  of  Internal  Revenue,  with 
the  approval  of  the  Secretary  of  the  Treas¬ 
ury,  is  authorized  whenever  he  shall  deem 
it  to  be  necessary  for  the  prevention  of  vio¬ 
lations  of  this  law  to  prescribe  that  wine 
spirits  withdrawn  under  this  section  shall 
not  be  used  to  fortify  wines  except  at  a 
certain  distance  prescribed  by  him  from  any 

—107— 


distillery,  rectifying  house,  winery,  or  other 
establishment  used  for  producing  or  stor¬ 
ing  distilled  spirits,  or  for  making  or  stor¬ 
ing  wines  other  than  wines  which  are  so 
fortified,  and  that  in  the  building  in  which 
such  fortification  of  wines  is  practiced  no 
wines  or  spirits  other  than  those  permitted 
by  this  regulation  shall  be  stored  in  any 
room  or  part  of  the  building  in  which 
fortification  of  wines  is  practiced.  The  use 
of  wine  spirits  for  the  fortification  of  sweet 
wines  under  this  Act  shall  be  under  the  im¬ 
mediate  supervision  of  an  officer  of  internal 
revenue,  who  shall  make  returns  describ¬ 
ing  the  kinds  and  quantities  of  wine  so  forti¬ 
fied,  and  shall  affix  such  stamps  and  seals 
to  the  packages  containing  such  wines  as 
may  be  prescribed  by  the  Commissioner  of 
Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury;  and  the  Com¬ 
missioner  of  Internal  Revenue,  with  the  ap¬ 
proval  of  the  Secretary  of  the  Treasury, 
shall  provide  by  regulations  the  time  within 
which  wines  so  fortified  with  the  wine 
spirits  so  withdrawn  may  be  subject  to  in¬ 
spection,  and  for  final  accounting  for  the 
use  of  such  wine  spirits  and  for  reware¬ 
housing  or  for  payment  of  the  tax  on  any 
portion  of  such  wine  spirits  which  remain 
not  used  in  fortifying  pure  sweet  wines.” 

Removal  of  Domestic  Wines. 

Sec.  618.  (a)  That  under  such  regula¬ 
tions  and  upon  the  execution  of  such  no¬ 
tices,  entries,  bonds,  and  other  security  as 
the  Commissioner,  with  the  approval  of  the 
Secretary,  may  prescribe,  domestic  wines 
subject  to  the  tax  imposed  by  section  611 
may  be  removed  from  the  winery  where 
produced,  free  of  tax,  for  storage  on  other 
bonded  premises  or  from  such  premises  to 
other  bonded  premises  (but  not  more  than 
one  such  additional  removal  shall  be  al¬ 
lowed),  or  for  exportation  from  the  United 
States  or  for  use  as  distilling  material  at 
any  regularly  registered  distillery:  Pro¬ 
vided,  hozvever ,  That  the  distiller  using  any 
such  wine  as  material  shall,  subject  to  the 
provisions  of  section  3309  of  the  Revised 
Statutes,  as  amended,  be  held  to  pay  the 
tax  on  the  product  of  such  wines  as  will 
include  both  the  alcoholic  strength  therein 

—108— 


produced  by  fermentation  and  that  obtained 
from  the  brandy  or  wine  spirits  added  to 
such  wines  at  the  time  of  fortification. 

Production  of  Grape  Wine. 

(b)  Under  regulations  prescribed  by  the 
Commissioner  with  the  approval  of  the  Sec¬ 
retary,  it  shall  be  lawful  to  produce  grape 
wines  on  bonded  winery  premises  by  the 
usual  method,  and  to  transport  and  use  the 
same,  and  like  wines  heretofore  produced 
and  now  stored  on  bonded  winery  premises, 
as  distilling  material  for  the  production  of 
nonbeverage  spirits  in  the  production  of 
nonalcoholic  wines,  containing  less  than  ]/. 2 
of  1  per  centum  of  alcohol  by  volume,  in  any 
fruit  brandy  or  industrial  distillery:  Pro¬ 
vided,  That  all  alcoholic  spirits  so  obtained 
at  any  industrial  distillery  shall  be  dena¬ 
tured,  and  all  spirits  so  obtained  at  any  fruit 
distillery  shall  be  removed  and  used  only 
for  nonbeverage  purposes  or  for  denatura- 
tion. 

Tax  Assessment  Permissible  Instead  of 
Stamps  on  Imported  Still  Wines. 

Sec.  619.  That  the  collection  of  the  tax 
on  imported  still  wines,  including  vermuth, 
and  sparkling  wines,  including  champagne, 
and  on  imported  liqueurs,  cordials,  and  sim¬ 
ilar  compounds,  may  be  made  within  the 
discretion  of  the  Commissioner,  with  the  ap¬ 
proval  of  the  Secretary,  by  assessment  in¬ 
stead  of  by  stamps. 

Penalty. 

Sec.  620.  That  whoever  evades  or  at¬ 
tempts  to  evade  any  tax  imposed  by  sections 
611  to  615,  both  inclusive,  or  any  require¬ 
ment  of  sections  610  to  621,  both  inclusive, 
or  regulation  issued  pursuant  thereto,  or 
whoever,  otherwise  than  as  provided  in  such 
sections,  recovers  or  attempts  to  recover 
any  spirits  from  domestic  or  imported  wine, 
or  whoever  rectifies,  mixes,  or  compounds 
with  distilled  spirits  any  domestic  wines, 
other  than  in  the  manufacture  of  liqueurs, 
cordials,  or  similar  compounds,  shall,  on  con¬ 
viction,  be  punished  for  each  such  offense  by 
a  fine  of  not  exceeding  $5,000,  or  imprison¬ 
ment  for  not  more  than  five  years,  or  both, 
and  in  addition  thereto  by  a  penalty  of 

* — 109 — 


double  the  tax  evaded,  or  attempted  to  be 
evaded,  to  be  assessed  and  collected  in  the 
same  manner  as  taxes  are  assessed  and  col¬ 
lected,  and  all  wines,  spirits,  liqueurs,  cor¬ 
dials,  or  similar  compounds  as  to  which  such 
violation  occurs  shall  be  forfeited  to  the 
United  States.  But  the  provisions  of  this 
section  and  the  provisions  of  section  3244 
of  the  Revised  Statutes,  as  amended,  relat¬ 
ing  to  rectification,  or  other  internal-revenue 
laws  of  the  United  States,  shall  not  be  held 
to  apply  to  or  prohibit  the  mixing  or  blend¬ 
ing  of  wines  subject  to  tax  under  the  pro¬ 
visions  of  sections  611  to  615,  both  inclu¬ 
sive,  with  each  other  or  with  other  wines 
for  the  sole  purpose  of  perfecting  such  wines 
according  to  commercial  standards :  Pro¬ 
vided,  That  nothing  herein  contained  shall 
be  construed  as  prohibiting  the  use  of  tax- 
paid  grain  or  other  ethyl  alcohol  in  the 
fortification  of  sweet  wines  as  defined  in 
section  610  of  this  Act  and  section  43  of  the 
Act  entitled  “An  Act  to  reduce  the  revenue 
and  equalize  duties  on  imports,  and  for 
other  purposes,”  approved  October  1,  1890, 
as  amended  by  this  Act. 

Meters,  Etc.,  Installed. 

Sec.  621.  That  the  Commissioner,  by 
regulations  to  be  approved  by  the  Secre¬ 
tary,  may  require  the  use  at  each  fruit  dis¬ 
tillery  of  such  spirit  meters,  and  such  locks 
and  seals  to  be  affixed  to  fermenters,  tanks, 
or  other  vessels  and  to  such  pipe  connec¬ 
tions  as  may  in  his  judgment  be  necessary 
or  expedient,  and  is  hereby  authorized  to  as¬ 
sign  to  any  such  distillery  and  to  each  win¬ 
ery  where  wines  are  to  be  fortified  such 
number  of  gaugers  or  storekeeper-gaugers 
in  the  capacity  of  gaugers  as  may  be  neces¬ 
sary  for  the  proper  supervision  of  the  manu¬ 
facture  of  brandy  or  the  making  or  fortify¬ 
ing  of  wines  subject  to  tax  imposed  by  this 
section ;  and  the  compensation  of  such  offi¬ 
cers  shall  not  exceed  $5  per  diem  while  so 
assigned,  together  with  their  actual  and 
necessary  traveling  expenses,  and  also  a 
reasonable  allowance  for  their  board  bills, 
to  be  fixed  by  the  Commissioner,  with  the 
approval  of  the  Secretary,  but  not  to  exceed 
$2.50  per  diem  for  such  board  bills. 

—110— 


Allowance  for  Loss. 

Sec.  622.  That  the  Commissioner,  with 
the  approval  of  the  Secretary,  is  hereby  au¬ 
thorized  to  make  such  allowances  for  . 
avoidable  loss  of  wines  while  on  storage  or 
during  cellar  treatment  as  in  his  judgment 
may  be  just  and  proper. 

Beer  Formulae  Process. 

Sec.  623.  That  the  second  paragraph  of 
section  3264  of  the  Revised  Statutes,  as 
amended  by  section  5  of  the  Act  of  March 
1,  1879,  and  as  further  amended  by  the  Act 
of  June  22,  1910,  be  amended  so  as  to  read 
as  follows: 

“In  all  surveys  forty-five  gallons  of  mash 
or  beer  brewed  or  fermented  from  grain 
shall  represent  not  less  than  one  bushel  of 
grain,  and  seven  gallons  of  mash  or  beer 
brewed  or  fermented  from  molasses  shall 
represent  not  less  than  one  gallon  of  mo¬ 
lasses,  except  in  distilleries  operated  on  the 
sour-mash  principle,  in  which  distilleries 
sixty  gallons  of  beer  brewed  or  fermented 
from  grain  shall  represent  not  less  than  one 
bushel  of  grain,  and  except  that  in  distiller¬ 
ies  where  the  filtration-aeration  process  is 
used,  with  the  approval  of  the  Commis¬ 
sioner  of  Internal  Revenue;  that  is,  where 
the  mash  after  it  leaves  the  mash  tub  is 
passed  through  a  filtering  machine  before  it 
is  run  into  the  fermenting  tub,  and  only 
the  filtered  liquor  passes  into  the  fermenting 
tub,  there  shall  hereafter  be  no  limitation 
upon  the  number  of  gallons  of  water  which 
may  be  used  in  the  process  of  mashing  or 
filtration  for  fermentation;  but  the  Commis¬ 
sioner  of  Internal  Revenue,  with  the  ap¬ 
proval  of  the  Secretary  of  the  Treasury, 
in  order  to  protect  the  revenue,  shall  be 
authorized  to  prescribe  by  regulation,  to 
be  made  by  him,  such  character  of  survey 
as  he  may  find  suitable  for  distilleries  using 
such  filtration-aeration  process.  The  pro¬ 
visions  hereof  relating  to  filtration-aeration 
process  shall  apply  only  to  sweet-mash  dis¬ 
tilleries.” 

Transfer  of  Distilled  Spirits. 

Sec.  624.  That  under  such  regulations  as 
the  Commissioner,  with  the  approval  of  the 

—111— 


Secretary,  may  prescribe,  alcohol  or  other 
distilled  spirits  of  a  proof  strength  of  not 
less  than  one  hundred  and  eighty  degrees 
intended  for  export  free  of  tax  may  be 
drawn  from  receiving  cisterns  at  any  dis¬ 
tillery,  or  from  storage  tanks  in  any  distill¬ 
ery  warehouse,  for  transfer  to  tanks  or  tank 
cars  for  export  from  the  United  States,  and 
all  provisions  of  existing  law  relating  to  the 
exportation  of  distilled  spirits  not  inconsist¬ 
ent  herewith  shall  apply  to  spirits  removed 
for  export  under  the  provisions  of  this  Act. 

Brandies  Conditionally  Exempt — Formulae. 

Sec.  625.  That  section  3255  of  the  Revised 
Statutes  as  amended  by  the  Act  of  June  3, 
1896,  and  as  further  amended  by  the  Act 
of  March  2,  1911,  be  further  amended  so 
as  to  read  as  follows : 

“Sec.  3255.  The  Commissioner  of  Inter¬ 
nal  Revenue,  with  the  approval  of  the  Sec¬ 
retary  of  the  Treasury,  may  exempt  distill¬ 
ers  of  brandy  made  exclusively  from  apples, 
peaches,  grapes,  pears,  pineapples,  oranges, 
apricots,  berries,  plums,  pawpaws,  persim¬ 
mons,  prunes,  figs,  or  cherries  from  any  pro¬ 
vision  of  this  title  relating  to  the  manufac¬ 
ture  of  spirits,  except  as  to  the  tax  thereon, 
when  in  his  judgment  it  may  seem  expe¬ 
dient  to  do  so :  Provided,  That  where,  in 
the  manufacture  of  wine,  artificial  sweeten¬ 
ing  has  been  used  the  wine  or  the  fruit 
pomace  residuum  may  be  used  in  the  distil¬ 
lation  of  brandy,  and  such  use  shall  not 
prevent  the  Commissioner  of  Internal  Rev¬ 
enue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  from  exempting  such  distiller 
from  any  provision  of  this  title  relating  to 
the  manufacture  of  spirits,  except  as  to  the 
tax  thereon,  wrhen  in  his  judgment  it  may 
seem  expedient  to  do  so :  And  provided 
further,  That  the  distillers  mentioned  in 
this  section  may  add  to  not  less  than  five 
hundred  gallons  (or  ten  baii'els)  of  grape 
cheese  not  more  than  five  hundred  gallons 
of  a  sugar  solution  made  from  cane,  beet, 
starch,  or  corn  sugar,  95  per  centum  pure, 
such  solution  to  have  a  saccharine  strengthof 
not  to  exceed  10  per  centum,  and  may  fer¬ 
ment  the  resultant  mixture  on  a  winery  or 
distillery  premises,  and  such  fermented 

—112— 


product  shall  be  regarded  as  distilling  ma¬ 
terial.” 


Gin. 

Sec.  626.  That  distilled  spirits  known 
commercially  as  gin  of  not  less  than  80  per 
centum  proof  may  at  any  time  within  eight 
years  after  entry  in  bond  at  any  distillery 
be  bottled  in  bond  at  such  distillery  for  ex¬ 
port  without  the  payment  of  tax,  under  such 
rules  and  regulations  as  the  Commissioner, 
with  the  approval  of  the  Secretary,  may 
prescribe. 

Penalty. 

Sec.  627.  That  section  3354  of  the  Re¬ 
vised  Statutes  as  amended  by  the  Act  ap¬ 
proved  June  18,  189v\  be,  and  is  hereby, 
amended  to  read  as  follows: 

“Sec.  3354.  Every  person  who  withdraws 
any  fermented  liquor  from  any  hogshead, 
barrel,  keg,  or  other  vessel  upon  which  the 
proper  stamp  has  not  been  affixed  for  the 
purpose  of  bottling  the  same,  or  who  carries 
on  or  attempts  to  carry  on  the  business  of 
bottling  fermented  liquor  in  any  brewery  or 
other  place,  in  which  fermented  liquor  is 
made,  or  upon  any  premises  having  com¬ 
munication  with  such  brewery,  or  any  ware¬ 
house,  shall  be  liable  to  a  fine  of  $500,  and 
the  property  used  in  such  bottling  or  busi¬ 
ness  shall  be  liable  to  forfeiture:  Provided , 
however,  That  this  section  shall  not  be  con¬ 
strued  to  prevent  the  withdrawal  and  trans¬ 
fer  of  unfermented,  partially  fermented,  or 
fermented  liquors  from  any  of  the  vats  in 
any  brewery  by  way  of  a  pipe  line  or  other 
conduit  to  another  building  or  place  for  the 
sole  purpose  of  bottling  the  same,  such  pipe 
line  or  conduit  to  be  constructed  and  oper¬ 
ated  in  such  manner  and  with  such  cisterns, 
vats,  tanks,  valves,  cocks,  faucets,  and 
gauges,  or  other  utensils  or  apparatus, 
either  on  the  premises  of  the  brewery  or  the 
bottling  house,  and  with  such  changes  of 
or  additions  thereto,  and  such  locks,  seals, 
or  other  fastenings,  and  under  such  rules 
and  regulations  as  shall  be  from  time  to 
time  prescribed  by  the  Commissioner  of 
Internal  Revenue,  subject  to  the  approval  of 
the  Secretary  of  the  Treasury,  and  all  locks 
and  seals  prescribed  shall  be  provided  by 

— 113 — 


the  Commissioner  of  Internal  Revenue  at 
the  expense  of  the  United  States:  Pro¬ 
vided  further ,  That  the  tax  imposed  in  sec¬ 
tion  3339  of  the  Revised  Statutes  shall  be 
paid  on  all  fermented  liquor  removed  from 
a  brewery  to  a  bottling  house  by  means  of 
a  pipe  or  conduit,  at  the  time  of  such  re¬ 
moval,  by  the  cancellation  and  defacement, 
by  the  collector  of  the  district  or  his  deputy, 
in  the  presence  of  the  brewer,  of  the  num¬ 
ber  of  stamps  denoting  the  tax  on  the  fer¬ 
mented  liquor  thus  removed.  The  stamps 
thus  canceled  and  defaced  shall  be  disposed 
of  and  accounted  for  in  the  manner  directed 
by  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the 
Treasury.  And  any  Violation  of  the  rules 
and  regulations  hereafter  prescribed  by  the 
Commissioner  of  Internal  Revenue,  with 
the  approval  of  the  Secretary  of  the  Treas¬ 
ury,  m  pursuance  of  these  provisions,  shall 
be  subject  to  the  penalties  above  provided 
by  this  section.  Every  owner,  agent,  or  su¬ 
perintendent  of  any  brewery  or  bottling 
house  who  removes,  or  connives  at  the  re¬ 
moval  of,  any  fermented  liquor  through  a 
pipe  line  or  conduit,  without  payment  of  the 
tax  thereon,  or  who  attempts  in  any  manner 
to  defraud  the  revenue  as  above,  shall  for¬ 
feit  all  the  liquors  made  by  and  for  him,  and 
all  the  vessels,  utensils,  and  apparatus  used 
in  making  the  same.” 

Soft  Drinks.  \ 

Sec.  628.  That  there  shall  be  levied,  as¬ 
sessed,  collected,  and  paid  in  lieu  of  the 
taxes  imposed  by  sections  313  and  315  of 
the  Revenue  Act  of  1917 — 

(a)  Upon  all  beverages  derived  wholly 
or  in  part  from  cereals  or  substitutes  there¬ 
for,  and  containing  less  than  one-half  of  one 
per  centum  of  alcohol,  sold  by  the  manu¬ 
facturer,  producer,  or  importer,  in  bottles 
or  other  closed  containers,  a  tax  equivalent 
to  15  per  centum  of  the  price  for  which  so 
sold;  and  upon  all  unfermented  grape  juice, 
ginger  ale,  root  beer,  sarsaparilla,  pop,  ar¬ 
tificial  mineral  waters  (carbonated  or  not 
carbonated),  other  carbonated  waters  or 
beverages,  and  other  soft  drinks,  sold  by  the 
manufacturer,  producer,  or  importer,  in  bot- 


—114 


ties  or  other  closed  containers,  a  tax  equiv¬ 
alent  to  10  per  centum  of  the  price  for 
which  so  sold ;  and 

Waters. 

(b)  Upon  all  natural  mineral  waters  or 
table  waters,  sold  by  the  producer,  bottler, 
or  importer  thereof,  in  bottles  or  other 
closed  containers,  at  over  10  cents  per  gal¬ 
lon,  a  tax  of  2  cents  per  gallon. 

Monthly  Returns — Notice. 

Sec.  629.  That  each  manufacturer,  pro¬ 
ducer,  bottler,  or  importer  of  any  of  the  ar- 
;  tides  enumerated  in  section  628  shall  make 
monthly  returns  under  oath  in  duplicate  and 
pay  the  taxes  imposed  in  respect  to  such 
articles  by  such  section  to  the  collector  for 
'  the  district  in  which  is  located  the  principal 
i  place  of  business,  containing  such  informa¬ 
tion  necessary  for  the  assessment  of  the  tax, 

>  and  at  such  times  and  in  such  manner  as 
|  the  Commissioner,  with  the  approval  of  the 
|  Secretary,  may  by  regulation  prescribe. 

The  tax  shall,  without  assessment  by  the 
'  Commissioner  or  notice  from  the  collector, 
be  due  and  payable  to  the  collector  at  the 
time  so  fixed  for  filing  the  return.  If  the 
h  tax  is  not  paid  when  due,  there  shall  be 
I  added  as  part  of  the  tax  a  penalty  of  5  per 
[  centum,  together  with  interest  at  the  rate 
I  of  1  per  centum  for  each  full  month,  from 
I  the  time  when  the  tax  became  due. 

Soft  Drinks,  Ice  Cream — Retail. 

|i  Sec.  630.  That  on  and  after  May  1,  1919, 
ft  there  shall  be  levied,  assessed,  collected,  and 
paid  a  tax  of  1  cent  for  each  10  cents  or  frac¬ 
tion  thereof  of  the  amount  paid  to  any  per¬ 
son  conducting  a  soda  fountain,  ice-cream 
parlor,  or  other  similar  place  of  business, 
ifor  drinks  commonly  known  as  soft  drinks, 

Impounded  or  mixed  at  such  place  of  busi- 
ss,  or  for  ice  cream,  ice  cream  sodas,  sun- 
es,  or  other  similar  articles  of  food  or 
ink,  when  any  of  the  above  are  sold  on 
after  such  date  for  consumption  in  or  in 
oximity  to  such  place  of  business.  Such 
x  shall  be  paid  by  the  purchaser  to  the 
ndor  at  the  time  of  the  sale  and  shall  be 
llected,  returned,  and  paid  to  the  United 

—115— 


States  by  such  vendor  in  the  same  manner 
as  provided  in  section  502. 

TITLE  VII.— TAX  ON  CIGARS,  TO¬ 
BACCO,  AND  MANUFACTURES 
THEREOF. 

Sec.  700.  (a)  That  upon  cigars  and  cigar¬ 
ettes  manufactured  in  or  imported  into  the 
United  States,  and  hereafter  sold  by  the 
manufacturer  or  importer,  or  removed  for 
consumption  or  sale,  there  shall  be  levied, 
collected,  and  paid  under  the  provisions  of 
existing  law,  in  lieu  of  the  internal-revenue 
taxes  now  imposed  thereon  by  law,  the  fol¬ 
lowing  taxes,  to  be  paid  by  the  manufac¬ 
turer  or  importer  thereof — 

Cigars — Rates. 

On  cigars  of  all  descriptions  made  of 
tobacco,  or  any  substitute  therefor,  and 
weighing  not  more  than  three  pounds  per 
thousand,  $1.50  per  thousand; 

On  cigars  made  of  tobacco,  or  any  substi¬ 
tute  therefor,  and  weighing  more  than 
three  pounds  per  thousand,  if  manufactured 
or  imported  to  retail  at  not  more  than  5 
cents  each,  $4  per  thousand ; 

If  manufactured  or  imported  to  retail  at 
more  than  5  cents  each  and  not  more  than  8 
cents  each,  $6  per  thousand; 

If  manufactured  or  imported  to  retail  at 
more  than  8  cents  each  and  not  more  than 
15  cents  each,  $9  per  thousand; 

If  manufactured  or  imported  to  retail  at 
more  than  15  cents  each  and  not  more  than 
20  cents  each,  $12  per  thousand; 

If  manufactured  or  imported  to  retail  at 
more  than  20  cents  each,  $15  per  thousand; 

Cigarettes — Rates. 

On  cigarettes  made  of  tobacco,  or  any 
substitute  therefor,  and  weighing  not  more 
than  three  pounds  per  thousand,  $3  per 
thousand ; 

Weighing  more  than  three  pounds  per 
thousand,  $7.20  per  thousand. 

Retail  Price.  i  j 

(b)  Whenever  in  this  section  reference 
is  made  to  cigars  manufactured  or  imported 
to  retail  at  net  over  a  certain  price  each, 

—116— 


then  in  determining  the  tax  to  be  paid  re¬ 
gard  shall  be  had  to  the  ordinary  retail  price 

of  a  single  cigar 

Cigars — Labeling. 

(c)  The  Commissioner  may,  by  regula¬ 
tion,  require  the  manufacturer  or  importer 
to  affix  to  each  box,  package,  or  container  a 
conspicuous  label  indicating  the  clause  of 
this  section  under  which  the  cigars  therein 
contained  have  been  tax-paid,  which  must 
correspond  with  the  tax-paid  stamp  on  such 
box  or  container, 

Cigarettes — Labeling. 

(d)  Every  manufacturer  of  cigarettes 
(including  small  cigars  weighing  not  more 
than  three  pounds  per  thousand)  shall  put 
up  all  the  cigarettes  and  such  small  cigars 
that  he  manufactures  or  has  manufactured 
for  him,  and  sells  or  removes  for  consump¬ 
tion  or  sale,  in  packages  or  parcels  contain¬ 
ing  five,  eight,  ten,  twelve,  fifteen,  sixteen, 
twenty,  twenty-four,  forty,  fifty,  eighty,  or 
one  hundred  cigarettes  each,  and  shall  se¬ 
curely  affix  to  each  of  such  packages  or  par¬ 
cels  a  suitable  stamp  denoting  the  tax  there¬ 
on  and  shall  properly  cancel  the  same  prior 
to  such  sale  or  removal  for  consumption  or 
sale  under  such  regulations  as  the  Commis¬ 
sioner,  with  the  approval  of  the  Secretary, 
shall  prescribe;  and  all  cigarettes  imported 
from  a  foreign  country  shall  be  packed, 
stamped,  and  the  stamps  canceled  in  a  like 
manner,  in  addition  to  the  import  stamp  in¬ 
dicating  inspection  of  the  customhouse  be¬ 
fore  they  are  withdrawn  therefrom. 

Tobacco  and  Snuff. 

Sec.  701.  (a)  That  upon  all  tobacco  and 
snuff  manufactured  in  or  imported  into  the 
United  States,  and  hereafter  sold  by  the 
manufacturer  or  importer,  or  removed  for 
consumption  or  sale,  there  shall  be  levied, 
collected,  and  paid,  in  lieu  of  the  internal- 
revenue  taxes  now  imposed  thereon  by  law, 
a  tax  of  18  cents  per  pound,  to  be  paid  by 
the  manufacturer  or  importer  thereof. 

(b)  Section  3362  of  the  Revised  Statutes, 
as  amended,  is  hereby  amended  to  read  as 
follows : 


—117— 


Preparation — Packages. 

“Sec.  3362.  All  manufactured  tobacco 
shall  be  put  up  and  prepared  by  the  manu¬ 
facturer  for  sale,  or  removal  for  sale  or  con¬ 
sumption,  in  packages  of  the  following  de¬ 
scription  and  in  no  other  manner: 

“All  smoking  tobacco,  snuff,  fine-cut 
chewing  tobacco,  all  cut  and  granulated  to¬ 
bacco,  all  shorts,  the  refuse  of  fine-cut  chew¬ 
ing,  which  has  passed  through  a  riddle  of 
thirty-six  meshes  to  the  square  inch,  and 
all  refuse  scraps,  clippings,  cuttings,  and 
sweepings  of  tobacco,  and  all  other  kinds  of 
tobacco  not  otherwise  provided  for,  in  pack¬ 
ages  containing  one-eighth  of  an  ounce, 
three-eighths  of  an  ounce,  and  further  pack¬ 
ages  with  a  difference  between  each  pack¬ 
age  and  the  one  next  smaller  of  one-eighth 
of  an  ounce  up  to  and  including  two  ounces, 
and  further  packages  with  a  difference  be¬ 
tween  each  package  and  the  one  next 
smaller  of  one-fourth  of  an  ounce  up  to  and 
including  four  ounces,  and  packages  of  five 
ounces,  six  ounces,  seven  ounces,  eight 
ounces,  ten  ounces,  twelve  ounces,  fourteen 
ounces,  and  sixteen  ounces :  Provided , 
That  snuff  may,  at  the  option  of  the  manu¬ 
facturer,  be  put  up  in  bladders  and  in  jars 
containing  not  exceeding  twenty  pounds. 

“All  cavendish,  plug,  and  twist  tobacco, 
in  wooden  packages  not  exceeding  two 
hundred  pounds  net  weight. 

Labeling — Marking. 

“And  every  such  wooden  package  shall 
have  printed  or  marked  thereon  the  manu¬ 
facturer’s  name  and  place  of  manufacture, 
the  registered  number  of  the  manufactory, 
and  the  gross  weight,  the  tare,  and  the  net 
weight  of  the  tobacco  in  each  package :  Pro¬ 
vided,  That  these  limitations  and  descrip¬ 
tions  of  packages  shall  not  apply  to  tobacco 
and  snuff  transported  in  bond  for  exporta¬ 
tion  and  actually  exported :  And  provided 
further ,  That  perique  tobacco,  snuff  flour, 
fine-cut  shorts,  the  refuse  of  fine-cut  chew¬ 
ing  tobacco,  refuse  scraps,  clippings,  cut¬ 
tings,  and  sweepings  of  tobacco,  may  be 
sold  in  bulk  as  material,  and  without  the 
payment  of  tax,  by  one  manufacturer  di¬ 
rectly  to  another  manufacturer,  or  for  ex- 

—118— 


port,  under  such  restrictions,  rules,  and 
regulations  as  the  Commissioner  of  Inter¬ 
nal  Revenue  may  prescribe:  And  provided 
further,  That  wood,  metal,  paper,  or  other 
materials  may  be  used  separately  or  in  com¬ 
bination  for  packing  tobacco,  snuff,  and 
cigars,  under  such  regulations  as  the  Com¬ 
missioner  of  Internal  Revenue  may  estab¬ 
lish” 

Floor  Tax. 

Sec.  702.  That  upon  all  the  articles  enu¬ 
merated  in  section  7 00  or  701,  which  were 
manufactured  or  imported,  and  removed 
from  factory  or  customhouse  on  or  prior 
to  the  date  of  the  passage  of  this  Act,  and 
upon  which  the  tax  imposed  by  existing 
law  has  been  paid,  and  which  are,  on  the 
day  after  the  passage  of  this  Act,  held  by 
any  person  and  intended  for  sale,  there  shall 
be  levied,  assessed,  collected,  and  paid  a 
floor  tax  equal  to  the  difference  between  (a) 
the  tax  imposed  by  this  Act  upon  such  arti¬ 
cles  according  to  the  class  in  which  they  are 
placed  by  this  title  and  (b)  the  tax  imposed 
upon  such  articles  by  existing  law  other  than 
section  403  of  the  Revenue  Act  of  1917. 

Cigarette  Papers  and  Tubes. 

Sec.  703.  That  there  shall  be  levied,  col¬ 
lected,  and  paid,  in  lieu  of  the  taxes  im¬ 
posed  by  section  404  of  the  Revenue  Act  of 
1917,  upon  cigarette  paper  made  up  into 
packages,  books,  sets,  or  tubes,  made  up  in 
or  imported  into  the  United  States  and  here¬ 
after  sold  by  the  manufacturer  or  importer 
to  any  person  (other  than  to  a  manufacturer 
of  cigarettes  for  use  by  him  in  the  manufac¬ 
ture  of  cigarettes)  the  following  taxes,  to 
be  paid  by  the  manufacturer  or  importer: 
On  each  package,  book,  or  set,  containing 
more  than  twenty-five  but  not  more  than 
fifty  papers,  /2  cent;  containing  more  than 
fifty  but  not  more  than  one  hundred  papers, 
1  cent;  containing  more  than  one  hundred 
papers,  y2  cent  for  each  fifty  papers  or  frac¬ 
tional  part  thereof ;  and  upon  tubes,  1  cent 
for  each  fifty  tubes  or  fractional  part  there¬ 
of. 

Every  manufacturer  of  cigarettes  pur¬ 
chasing  any  cigarette  paper  made  up  into 
tubes  (a)  shall  give  bond  in  an  amount  and 

—119— 


with  sureties  satisfactory  to  the  Commis¬ 
sioner  that  he  will  use  such  tubes  in  the 
manufacture  of  cigarettes  or  pay  thereon  a 
tax  equivalent  to  the  tax  imposed  by  this 
section,  and  (b)  shall  keep  such  records  and 
render  under  oath  such  returns  as  the  Com¬ 
missioner  finds  necessary  to  show  the  dis¬ 
position  of  all  tubes  purchased  or  imported 
by  such  manufacturer  of  cigarettes. 

Dealers  in  Leaf  Tobacco — 
Requirements. 

Sec.  704.  That  section  35  of  the  Act  en¬ 
titled  “An  Act  to  provide  revenue,  equalize 
duties  and  encourage  the  industries  of  the 
United  States,  and  for  other  purposes/’  ap¬ 
proved  August  5,  1909,  be,  and  is  hereby, 
repealed,  to  take  effect  April  1,  1919. 

That  section  3360  of  the  Revised  Statutes 
be,  and  is  hereby,  amended  to  read  as  fol¬ 
lows  : 

“Sec.  3360.  (a)  Every  dealer  in  leaf  to¬ 
bacco  shall  file  with  the  collector  of  the  dis¬ 
trict  in  which  his  business  is  carried  on,  a 
statement  in  duplicate,  subscribed  under 
oath,  setting  forth  the  place,  and,  if  in  a  city, 
the  street  and  number  of  the  street,  where 
his  business  is  to  be  carried  on,  and  the 
exact  location  of  each  place  where  leaf  to¬ 
bacco  is  held  by  him  on  storage,  and,  when¬ 
ever  he  adds  to  or  discontinues  any  of  his 
leaf  tobacco  storage  places,  he  shall  give 
immediate  notice  to  the  collector  of  the  dis¬ 
trict  in  which  he  is  registered. 

“Every  such  dealer  shall  give  a  bond  with 
surety,  satisfactory  to,  and  to  be  approved 
by,  the  collector  of  the  district,  in  such  penal 
sum  as  the  collector  may  require,  not  less 
than  $500;  and  a  new  bond  may  be  required 
in  the  discretion  of  the  collector  or  under 
instructions  of  the  Commissioner. 

“Every  such  dealer  shall  be  assigned  a 
number  by  the  collector  of  the  district, 
which  number  shall  appear  in  every  inven¬ 
tory,  invoice  and  report  rendered  by  the 
dealer,  who  shall  also  obtain  certificates 
from  the  collector  of  the  district  setting 
forth  the  place  where  his  business  is  car¬ 
ried  on  and  the  places  designated  by  the 
dealer  as  the  places  of  storage  of  his  tobac¬ 
co,  which  certificates  shall  be  posted  con- 

—120— 


spicuously  within  the  dealer’s  registered 
place  of  business,  and  within  each  desig¬ 
nated  place  of  storage. 

“(b)  Every  dealer  in  leaf  tobacco  shall 
make  and  deliver  to  the  collector  of  the  dis- 
trict  a  true  inventory  of  the  quantity  of  the 
different  kinds  of  tobacco  held  or  owned, 
and  where  stored  by  him,  on  the  first  day  of 
January  of  each  year,  or  at  the  time  of  com¬ 
mencing  and  at  the  time  of  concluding  busi¬ 
ness,  if  before  or  after  the  first  day  of  Janu¬ 
ary,  such  inventory  to  be  made  under  oath 
and  rendered  in  such  form  as  may  be  pre¬ 
scribed  by  the  Commissioner. 

“Every  dealer  in  leaf  tobacco  shall  render 
such  invoices  and  keep  such  records  as  shall 
be  prescribed  by  the  Commissioner,  and 
shall  enter  therein,  day  by  day,  and  upon  the 
same  day  on  which  the  circumstances,  thing 
or  act  to  be  recorded  is  done  or  occurs,  an 
accurate  account  of  the  number  of  hogs¬ 
heads,  tierces,  cases  and  bales,  and  quantity 
of  leaf  tobacco  contained  therein,  purchased 
or  received  by  him,  on  assignment,  consign¬ 
ment,  for  storage,  by  transfer  or  otherwise, 
and  of  whom  purchased  or  received,  and  the 
number  of  hogsheads,  tierces,  cases  and 
bales,  and  the  quantity  of  leaf  tobacco  con¬ 
tained  therein,  sold  by  him,  with  the  name 
and  residence  in  each  instance  of  the  person 
to  whom  sold,  and  if  shipped,  to  whom 
shipped,  and  to  what  district;  such  records 
shall  be  kept  at  his  place  of  business  at  all 
times  and  preserved  for  a  period  of  two 
years,  and  the  same  shall  be  open  at  all 
hours  for  the  inspection  of  any  internal- 
revenue  officer  or  agent. 

“Every  dealer  in  leaf  tobacco  on  or  before 
the  tenth  day  of  each  month,  shall  furnish 
to  the  collector  of  the  district  a  true  and 
complete  report  of  all  purchases,  receipts, 
sales  and  shipments  of  leaf  tobacco  made  by 
him  during  the  month  next  preceding,  which 
report  shall  be  verified  and  rendered  in  such 
form  as  the  Commissioner,  with  the  approv¬ 
al  of  the  Secretary,  shall  prescribe. 

“(c)  Sales  or  shipments  of  leaf  tobacco 
by  a  dealer  in  leaf  tobacco  shall  be  in  quan¬ 
tities  of  not  less  than  a  hogshead,  tierce, 
case,  or  bale,  except  loose  leaf  tobacco  com- 

—121— 


prising  the  breaks  on  warehouse  floors,  and 
except  to  a  duly  registered  manufacturer  of 
cigars  for  use  in  his  own  manufactory  ex¬ 
clusively. 

“Dealers  in  leaf  tobacco  shall  make  ship¬ 
ments  of  leaf  tobacco  only  to  other  dealers 
in  leaf  tobacco,  to  registered  manufacturers 
of  tobacco,  snuff,  cigars  or  cigarettes,  or  for 
export. 

“(d)  Upon  all  leaf  tobacco  sold,  removed 
or  shipped  by  any  dealer  in  leaf  tobacco  in 
violation  of  the  provisions  of  subdivision 
(c),  or  in  respect  to  which  no  report  has 
been  made  by  such  dealer  in  accordance 
with  the  provisions  of  subdivision  (b),  there 
shall  be  levied,  assessed,  collected  and  paid 
a  tax  equal  to  the  tax  then  in  force  upon 
manufactured  tobacco,  such  tax  to  be  as¬ 
sessed  and  collected  in  the  same  manner  as 
the  tax  on  manufactured  tobacco. 

“(e)  Every  dealer  in  leaf  tobacco 

Penalty. 

“(1)  who  neglects  or  refuses  to  furnish 
the  statement,  to  give  bond,  to  keep  books, 
to  file  inventory  or  to  render  the  invoices, 
returns  or  reports  required  by  the  Commis¬ 
sioner,  or  to  notify  the  collector  of  the  dis¬ 
trict  of  additions  to  his  places  of  storage;  or 

“(2)  who  ships  or  delivers  leaf  tobacco, 
except  as  herein  provided;  or 

“(3)  who  fraudulently  omits  to  account 
for  tobacco  purchased,  received,  sold,  or 
shipped ; 

shall  be  fined  not  less  than  $100  or  more 
than  $500,  or  imprisoned  not  more  than  one 
year,  or  both. 

“(f)  For  the  purposes  of  this  section  a 
farmer  or  grower  of  tobacco  shall  not  be  re¬ 
garded  as  a  dealer  in  leaf  tobacco  in  respect 
to  the  leaf  tobacco  produced  by  him.” 

TITLE  VIII.— TAX  ON  ADMISSIONS 
AND  DUES. 

Sec.  800.  (a)  That  from  and  after  April 
1,  1919,  there  shall  be  levied,  assessed,  col¬ 
lected,  and  paid,  in  lieu  of  the  taxes  imposed 
by  section  700  of  the  Revenue  Act  of  1917 — 

(1)  A  tax  of  1  cent  for  each  10  cents  or 
fraction  thereof  of  the  amount  paid  for  ad- 

—122— 


mission  to  any  place  on  of  after  such  date, 
including  admission  by  season  ticket  or  sub¬ 
scription,  to  be  paid  by  the  person  paying 
for  such  admission ; 

Passes  or  Free  Admissions. 

(2)  In  the  case  of  persons  (except  bona 
fide  employees,  municipal  officers  on  official 
business,  persons  in  the  military  or  naval 
forces  of  the  United  States  when  in  uni¬ 
form,  and  children  under  twelve  years  of 
age)  admitted  free  or  at  reduced  rates  to 
any  place  at  a  time  when  and  under  circum¬ 
stances  under  which  an  admission  charge  is 
made  to  other  persons,  a  tax  of  1  cent  for 
each  10  cents  or  fraction  thereof  of  the  price 
so  charged  to  such  other  persons  for  the 
same  or  similar  accommodations,  to  be  paid 
by  the  person  so  admitted ; 

Additional  Tax  on  Ticket  Brokers’  Excess 
Price  on  Ticket. 

(3)  Upon  tickets  or  cards  of  admission  to 
theaters,  operas,  and  other  places  of  amuse¬ 
ment,  sold  at  news  stands,  hotels,  and  places 
other  than  the  ticket  offices  of  such  theaters, 
operas,  or  other  places  of  amusement,  at 
not  to  exceed  50  cents  in  excess  of  the  sum 
of  the  established  price  therefor  at  such 
ticket  offices  plus  the  amount  of  any  tax  im¬ 
posed  under  paragraph  (1),  a  tax  equiv¬ 
alent  to  5  per  centum  of  the  amount  of  such 
excess;  and  if  sold  for  more  than  50  cents  in 
excess  of  the  sum  of  such  established  price 
plus  the  amount  of  any  tax  imposed  under 
paragraph  (1),  a  tax  equivalent  to  50  per 
centum  of  the  whole  amount  of  such  excess, 
such  taxes  to  be  returned  and  paid,  in  the 
manner  provided  in  section  903,  by  the  per¬ 
son  selling  such  tickets; 

(4)  A  tax  equivalent  to  50  per  centum  of 
the  amount  for  which  the  proprietors,  man¬ 
agers,  or  employees  of  any  opera  house, 
theater,  or  other  place  of  amusement  sell  or 
dispose  of  tickets  or  cards  of  admission  in 
excess  of  the  regular  or  established  price  or 
charge  therefor,  such  tax  to  be  returned  and 
paid,  in  the  manner  provided  in  section  903, 
by  the  person  selling  such  tickets ; 

—123— 


Leased  Boxes  or  Seats. 


(5)  In  the  case  of  persons  having  the  per¬ 
manent  use  of  boxes  or  seats  in  an  opera 
house  or  any  place  of  amusement  or  a  lease 
for  the  use  of  such  box  or  seat  in  such  opera 
house  or  place  of  amusement  (in  lieu  of  the 
tax  imposed  by  paragraph  (1)  ),  a  tax 
equivalent  to  10  per  centum  of  the  amount 
for  which  a  similar  box  or  seat  is  sold  for 
each  performance  or  exhibition  at  which  the 
box  or  seat  is  used  or  reserved  by  or  for  the 
lessee  or  holder,  such  tax  to  be  paid  by  the 
lessee  or  holder;  and 

Roof  Gardens,  Cabarets. 

(6)  A  tax  of  \y2  cents  for  each  10  cents  or 
fraction  thereof  of  the  amount  paid  for  ad¬ 
mission  to  any  public  performance  for  profit 
at  any  roof  garden,  cabaret,  or  other  similar 
entertainment,  to  which  the  charge  for  ad¬ 
mission  is  wholly  or  in  part  included  in  the 
price  paid  for  refreshment,  service,  or  mer¬ 
chandise  ;  the  amount  paid  for  such  admis¬ 
sion  to  be  deemed  to  be  20  per  centum  of 
the  amount  paid  for  refreshment,  service, 
and  merchandise;  such  tax  to  be  paid  by  the 
person  paying  for  such  refreshment,  serv¬ 
ice,  or  merchandise. 

Admissions — When  Exempt. 

(b)  No  tax  shall  be  levied  under  this  title 
in  respect  to  any  admissions  all  the  pro¬ 
ceeds  of  which  inure  exclusively  to  the  ben¬ 
efit  of  religious,  educational,  or  charitable 
institutions,  societies,  or  organizations,  so¬ 
cieties  for  the  prevention  of  cruelty  to  chil¬ 
dren  or  animals,  or  exclusively  to  the  bene¬ 
fit  of  organizations  conducted  for  the  sole 
purpose  of  maintaining  symphony  orches¬ 
tras  and  receiving  substantial  support  from 
voluntary  contributions,  none  of  the  profits 
of  which  are  distributed  to  members  of  such 
organizations,  or  exclusively  to  the  benefit 
of  persons  in  the  military  or  naval  forces  of 
the  United  States,  or  admissions  to  agricul¬ 
tural  fairs  none  of  the  profits  of  which  are 
distributed  to  stockholders  or  members  of 
the  association  conducting  the  same. 


—124 


Admission  Defined. 

(c)  The  term  “admission”  as  used  in  this 
title  includes  seats  and  tables,  reserved  or 
otherwise,  and  other  similar  accommoda¬ 
tions,  and  the  charges  made  therefor. 

Price  of  Ticket  Printed  Thereon — Name 
of  Vendor — Penalty. 

(d)  The  price  (exclusive  of  the  tax  to  be 
paid  by  the  person  paying  for  admission) 
at  which  every  admission  ticket  or  card  is 
sold  shall  be  conspicuously  and  indelibly 
printed,  stamped,  or  written  on  the  face  or 
back  thereof,  together  with  the  name  of  the 
vendor  if  sold  other  than  at  the  ticket  office 
of  the  theater,  opera,  or  other  place  of 
amusement.  Whoever  sells  an  admission 
ticket  or  card  on  which  the  name  of  the  ven¬ 
dor  and  price  is  not  so  printed,  stamped,  or 
written,  or  at  a  price  in  excess  of  the  price 
so  printed,  stamped,  or  written  thereon,  is 
guilty  of  a  misdemeanor,  and  upon  convic¬ 
tion  thereof  shall  be  fined  not  more  than 
$100. 

Club  Dues  or  Membership  Fees — 
Exemptions. 

Sec.  801.  That  from  and  after  April  1, 
1919,  there  shall  be  levied,  assessed,  collect¬ 
ed,  and  paid,  in  lieu  of  the  taxes  imposed  by 
section  701  of  the  Revenue  Act  of  1917,  a  tax 
equivalent  to  10  per  centum  of  any  amount 
paid  on  or  after  such  date,  for  any  period 
after  such  date,  (a)  as  dues  or  membership 
fees  (where  the  dues  or  fees  of  an  active 
resident  annual  member  are  in  excess  of  $10 
per  year)  to  any  social,  athletic,  or  sporting 
club  or  organization ;  or  (b)  as  initiation 
fees  to  such  a  club  or  organization,  if  such 
fees  amount  to  more  than  $10,  or  if  the  dues 
or  membership  fees  (not  including  initiation 
fees)  of  an  active  resident  annual  member 
are  in  excess  of  $10  per  year:  such  taxes  to 
be  paid  by  the  person  paying  such  dues  or 
fees:  Provided,  That  there  shall  be  exempt¬ 
ed  from  the  provisions  of  this  section  all 
amounts  paid  as  dues  or  fees  to  a  fraternal 
society,  order,  or  association,  operating  un¬ 
der  the  lodge  system.  In  the  case  of  life 
memberships  a  life  member  shall  pay  an¬ 
nually,  at  the  time  for  the  payment  of  dues 

—125— 


by  active  resident  annual  members,  a  tax 
equivalent  to  the  tax  upon  the  amount  paid 
by  such  a  member,  but  shall  pay  no  tax 
upon  the  amount  paid  for  life  membership. 

Collections — Returns. 

Sec.  802.  That  every  person  (a)  receiving 
any  payments  for  such  admission,  dues,  or 
fees  shall  collect  the  amount  of  the  tax  im¬ 
posed  by  section  800  or  801  from  the  person 
making  such  payments,  or  (b)  admitting 
any  person  free  to  any  place  for  admission 
to  which  a  charge  is  made,  shall  collect  the 
amount  of  the  tax  imposed  by  section  800 
from  the  person  so  admitted.  Every  club  or 
organization  having  life  members,  shall  col¬ 
lect  from  such  members  the  amount  of  the 
tax  imposed  by  section  801.  In  all  the  above 
cases  returns  and  payments  of  the  amount 
so  collected  shall  be  made  at  the  same  time 
and  in  the  same  manner  as  provided  in  sec¬ 
tion  502. 

TITLE  IX.— EXCISE  TAXES. 

Percentage  Rates  on  Specific  Articles. 

Sec.  900.  That  there  shall  be  levied,  as¬ 
sessed,  collected,  and  paid,  upon  the  follow¬ 
ing  articles  sold  or  leased  by  the  manufac¬ 
turer,  producer,  or  importer,  a  tax  equiva¬ 
lent  to  the  following  percentages  of  the 
price  for  which  so  sold  or  leased — 

(1)  Automobile  trucks  and  automobile 
wagons,  (including  tires,  inner  tubes,  parts, 
and  accessories  therefor,  sold  on  or  in  con¬ 
nection  therewith  or  with  the  sale  thereof), 
3  per  centum ; 

(2)  Other  automobiles  and  motorcycles, 
(including  tires,  inner  tubes,  parts,  and  ac¬ 
cessories  therefor,  sold  on  or  in  connection 
therewith  or  with  the  sale  thereof),  except 
tractors,  5  per  centum; 

(3)  Tires,  inner  tubes,  parts,  or  accesso¬ 
ries  for  any  of  the  articles  enumerated  in 
subdivision  (i)  or  (2),  sold  to  any  person 
other  than  a  manufacturer  or  producer  of 
any  of  the  articles  enumerated  in  subdivi¬ 
sion  (1)  or  (2),  5  per  centum; 

(4)  Pianos,  organs  (other  than  pipe  or¬ 
gans),  piano  players,  graphophones,  phono¬ 
graphs,  talking  machines,  music  boxes,  and 
records  used  in  connection  with  any  musi- 

—126— 


cal  instrument,  piano  player,  graphophone, 
phonograph,  or  talking  machine,  5  per  cen¬ 
tum  ; 

(5)  Tennis  rackets,  nets,  racket  covers 
and  presses,  skates,  snowshoes,  skis,  tobog¬ 
gans,  canoe  paddles  and  cushions,  polo  mal¬ 
lets,  baseball  bats,  gloves,  masks,  protect¬ 
ors,  shoes  and  uniforms,  football  helmets, 
harness  and  goals,  basket-ball  goals  and  uni¬ 
forms,  golf  bags  and  clubs,  lacrosse  sticks, 
balls  of  all  kinds,  including  baseballs,  foot¬ 
balls,  tennis,  golf,  lacrosse,  billiard  and  pool 
balls,  fishing  rods  and  reels,  billiard  and  pool 
tables,  chess  and  checker  boards  and  pieces, 
dice,  games  and  parts  of  games  (except 
playing  cards  and  children’s  toys  and 
games),  and  all  similar  articles  commonly  or 
commercially  known  as  sporting  goods,  10 
per  centum ; 

(6)  Chewing  gum  or  substitutes  therefor, 
3  per  centum ; 

(7)  Cameras,  weighing  not  more  than  100 
pounds,  10  per  centum; 

(8)  Photographic  films  and  plates,  other 
than  moving-picture  films,  5  per  centum ; 

(9)  Candy,  5  per  centum  ; 

(10)  Firearms,  shells,  and  cartridges,  ex¬ 
cept  those  sold  for  the  use  of  the  United 
States,  any  State,  Territory,  or  possession, 
of  the  United  States,  any  political  subdivi¬ 
sion  thereof,  the  District  of  Columbia,  or  any 
foreign  country  while  engaged  against  the 
German  Government  in  the  present  war,  10 
per  centum ; 

(11)  Hunting  and  bowie  knives,  10  per 
centum ; 

(12)  Dirk  knives,  daggers,  sword  canes, 
stillettos,  and  brass  or  metallic  knuckles, 
100  per  centum ; 

(13)  Portable  electric  fan,  5  per  centum; 

(14)  Thermos  and  thermostatic  bottles, 
carafes,  jugs,  or  other  thermostatic  con¬ 
tainers,  5  per  centum; 

(15)  Cigar  or  cigarette  holders  and  pipes, 
composed  wholly  or  in  part  of  meerschaum 
or  amber,  humidors,  and  smoking  stands,  10 
per  centum ; 

(16)  Automatic  slot-device  vending  ma¬ 
chines,  5  per  centum,  and  automatic  slot- 
device  weighing  machines,  10  per  centum ; 

.  —127— 


if  the  manufacturer,  producer,  or  importer 
of  any  such  machine  operates  it  for  profit,  he 
shall  pay  a  tax  in  respect  to  each  such  ma¬ 
chine  put  into  operation  equivalent  to  5  per 
centum  of  its  fair  market  value  in  the  case 
of  a  vending  machine,  and  10  per  centum  of 
its  fair  market  value  in  the  case  of  a  weigh¬ 
ing  machine ; 

(17)  Liveries  and  livery  boots  and  hats, 
10  per  centum ; 

(18)  Hunting  and  shooting  garments  and 
riding  habits,  10  per  centum; 

(19)  Articles  fnade  of  fur  on  the  hide  or 
pelt,  or  of  which  any  such  fur  is  the  com¬ 
ponent  material  of  chief  value,  10  per  cen¬ 
tum  ; 

(20)  Yachts  and  motor  boats  not  de¬ 
signed  for  trade,  fishing,  or  national  de¬ 
fense;  and  pleasure  boats  and  pleasure 
canoes  if  sold  for  more  than  $15,  10  per 
centum ;  and 

(21)  Toilet  soaps  and  toilet  soap  pow¬ 
ders,  3  per  centum. 

Wholesale  Price  May  Apply  to  Retail  Sale. 

If  any  manufacturer,  producer,  or  import¬ 
er  of  any  of  the  articles  enumerated  in  this 
section  customarily  sells  such  articles  both 
at  wholesale  and  at  retail,  the  tax  in  the  case 
of  any  article  sold  by  him  at  retail  shall  be 
computed  on  the  price  for  which  like  ar¬ 
ticles  are  sold  by  him  at  wholesale. 

The  taxes  imposed  by  this  section  shall, 
in  the  case  of  any  article  in  respect  to  which 
a  corresponding  tax  is  imposed  by  section 
600  of  the  Revenue  Act  of  1917,  be  in  lieu  of 
such  tax. 

Undervaluation  Adjustment. 

Sec.  901.  That  if  any  person  manufac¬ 
tures,  produces  or  imports  any  article 
enumerated  in  section  900,  or  leases  or  li¬ 
censes  for  exhibition  any  positive  motion- 
picture  film  containing  a  picture  ready  for 
projection,  and,  whether  through  any  agree¬ 
ment,  arrangement,  or  understanding,  or 
otherwise,  sells,  leases  or  licenses  such  ar¬ 
ticle  at  less  than  the  fair  market  price  ob¬ 
tainable  therefor,  either  (a)  in  such  manner 

— 128 — 


as  directly  or  indirectly  to  benefit  such  per¬ 
son  or  any  person  directly  or  indirectly  in¬ 
terested  in  the  business  of  such  person,  or 

Eb)  with  intent  to  cause  such  benefit,  the 
mount  for  which  such  article  is  sold,  leased 
or  licensed  shall  be  taken  to  be  the  amount 
which  would  have  been  received  from  the 
psale,  lease  or  license  of  such  article  if  sold, 
pleased  or  licensed  at  the  fair  market  price. 


Sculpture,  Paintings,  Etc. 

Sec.  902.  That  there  shall  be  levied,  as¬ 
sessed,  collected,  and  paid  upon  sculpture, 
paintings,  statuary,  art  porcelains,  and 
bronzes,  sold  by  any  person  other  than  the 
artist,  a  tax  equivalent  to  10  per  centum  of 
the  price  for  which  so  sold.  This  section 
hall  not  apply  to  the  sale  of  any  such  ar- 
icle  to  an  educational  institution  or  public 
rt  museum. 

Monthly  Returns — Penalty. 

Sec.  903.  That  every  person  liable  for  any 
tax  imposed  by  section  900,  902,  or  906,  shall 
take  monthly  returns  under  oath  in  dupli- 
:ate  and  pay  the  taxes  imposed  by  such  sec¬ 
tions  to  the  collector  for  the  district  in 
which  is  located  the  principal  place  of  busi¬ 
ness.  Such  returns  shall  contain  such  in¬ 
formation  and  be  made  at  such  times  and  in 
such  manner  as  the  Commissioner,  with  the 
lapproval  of  the  Secretary,  may  by  regula- 
gtions  prescribe. 

The  tax  shall,  without  assessment  by  the 
jCommissioner  or  notice  from  the  collector, 
be  due  and  payable  to  the  collector  at  the 
‘time  so  fixed  for  filing  the  return.  If  the 
tax  is  not  paid  when  due,  there  shall  be  add¬ 
ed  as  part  of  the  tax  a  penalty  of  5  per  cen¬ 
tum,  together  with  interest  at  the  rate  of  1 
per  centum  for  each  full  month,  from  the 
time  when  the  tax  became  due. 

Rates  on  Excess  Value — Miscellaneous. 
Sec.  904.  (a)  That  on  and  after  May  1, 
1919,  there  shall  be  levied,  assessed,  col¬ 
lected,  and  paid  a  tax  equivalent  to  10  per 
centum  of  so  much  of  the  amount  paid  for 
any  of  the  following  articles  as  is  in  excess 
of  the  price  hereinafter  specified  as  to  each 

—129— 


such  article,  when  such  article  is  sold  by  or 
for  a  dealer  or  his  estate  on  or  after  such 
date  for  consumption  or  use — 

(1)  Carpets  and  rugs,  including  fiber,  ex¬ 
cept  imported  and  American  rugs  made 
principally  of  wool,  on  the  amount  in  excess 
of  $5  per  square  yard; 

(2)  Picture  frames,  on  the  amount  in  ex¬ 
cess  of  $10  each ; 

(3)  Trunks,  on  the  amount  in  excess  of 
$50  each ; 

(4)  Valises,  traveling  bags,  suit  cases, 
hat  boxes  used  by  travelers,  and  fitted 
toilet  cases,  on  the  amount  in  excess  of  $25 
each ; 

(5)  Purses,  pocketbooks,  shopping  and 
hand  bags,  on  the  amount  in  excess  of  $7.50 
each ; 

(6)  Portable  lighting  fixtures,  including 
lamps  of  all  kinds  and  lamp  shades,  on  the 
amount  in  excess  of  $25  each ; 

(7)  Umbrellas,  parasols,  and  sun  shades, 
on  the  amount  in  excess  of  $4  each ; 

(8)  Fans,  on  the  amount  in  excess  of  $1 
each ; 

(9)  House  or  smoking  coats  or  jackets, 
and  bath  or  lounging  robes,  on  the  amount 
in  excess  of  $7.50  each ; 

(10)  Men’s  waistcoats,  sold  separately 
from  suits,  on  the  amount  in  excess  of  $5 
each ; 

(11)  'Women’s  and  misses’  hats,  bonnets, 
and  hoods,  on  the  amount  in  excess  of  $15 
each ; 

(12)  Men’s  and  boys’  hats,  on  the 

amount  in  excess  of  $5  each ; 

(13)  Men’s  and  boys’  caps,  on  the 

amount  in  excess  of  $2  each ; 

(14)  Men’s,  women’s,  misses’,  and  boys’ 
boots,  shoes,  pumps,  and  slippers,  not  in¬ 
cluding  shoes  or  appliances  made  to  order 
for  any  person  having  a  crippled  or  de¬ 
formed  foot  or  ankle,  on  the  amount  in  ex¬ 
cess  of  $10  per  pair; 

(15)  Men’s  and  boys’  neckties  and  neck¬ 
wear,  on  the  amount  in  excess  of  $2  each ; 

(16)  Men’s  and  boys’  silk  stockings  or 
hose,  on  the  amount  in  excess  of  $1  per 
rair ; 


—130— 


(17)  Women’s  and  misses’  silk  stockings 
or  hose,  on  the  amount  in  excess  of  $2  per 

pair; 

(18)  Men’s  shirts,  on  the  amount  in  ex¬ 
cess  of  $3  each  ; 

(19)  Men’s,  women’s,  misses’,  and  boys’ 
pajamas,  night  gowns,  and  underwear,  on 
the  amount  in  excess  of  $5  each ;  and 

(20)  Kimonos,  petticoats,  and  waists,  on 
the  amount  in  excess  of  $15  each. 

Exceptions. 

(b)  The  tax  imposed  by  this  section  shall 
not  apply  (1)  to  any  article  enumerated  in 
paragraphs  (2)  to  (8),  both  inclusive,  of 
subdivision  (a),  if  such  article  is  made  of,  or 
ornamented,  mounted,  or  fitted  with,  pre¬ 
cious  metals  or  imitations  thereof  or  ivory, 
or  (2)  to  any  article  made  of  fur  on  the  hide 
or  pelt,  or  of  which  any  such  fur  is  the  com¬ 
ponent  material  of  chief  value,  or  to  (3)  any 
article  enumerated  in  subdivision  (17)  or 
(18)  of  section  900. 

Vendor  to  Collect  and  Make  Return. 

(c)  The  taxes  imposed  by  this  section 
shall  be  paid  by  the  purchaser  to  the  vendor 
at  the  time  of  the  sale  and  shall  be  collected, 
returned,  and  paid  to  the  United  States  by 
such  vendor  in  the  same  manner  as  provid¬ 
ed  in  section  502. 

Jewelry. 

Sec.  905.  That  on  and  after  April  T,  1919, 
there  shall  be  levied,  assessed,  collected,  and 
paid  (in  lieu  of  the  tax  imposed  by  subdi¬ 
vision  (e)  of  section  600  of  the  Revenue  Act 
of  1917)  upon  all  articles  commonly  or  com¬ 
mercially  known  as  jewelry,  whether  real  or 
imitation;  pearls,  precious  and  semi-pre¬ 
cious  stones,  and  imitations  thereof ;  articles 
made  of,  or  ornamented,  mounted  or  fitted 
with,  precious  metals  or  imitations  thereof 
i  or  ivory  (not  including  surgical  instru¬ 
ments);  watches;  clocks;  opera  glasses; 
lorgnettes;  marine  glasses;  field  glasses; 
and  binoculars;  upon  any  of  the  above  when 
sold  by  or  for  a  dealer  or  his  estate  for  con¬ 
sumption  or  use,  a  tax  equivalent  to  5  per 
| centum  of  the  price  for  which  so  sold. 

—131— 


Returns — Penalty. 

Every  person  selling  any  of  the  articles 
enumerated  in  this  section  shall  make  re- 
turns  under  oath  in  duplicate  (monthly  or  ; 
quarterly  as  the  Commissioner,  with  the  ap¬ 
proval  of  the  Secretary,  may  prescribe)  and 
pay  the  taxes  imposed  in  respect  to  such  ar¬ 
ticles  by  this  section  to  the  collector  for  the 
district  in  which  is  located  the  principal 
place  of  business.  Such  returns  shall  con¬ 
tain  such  information  and  be  made  at  such 
times  and  in  such  manner  as  the  Commis¬ 
sioner,  with  the  approval  of  the  Secretary, 
may  by  regulations  prescribe. 

The  tax  shall,  without  assessment  by  the 
Commissioner  or  notice  from  the  collector, 
be  due  and  payable  to  the  collector  at  the 
time  so  fixed  for  filing  the  return.  If  the  tax 
is  not  paid  when  due,  there  shall  be  added 
as  part  of  the  tax  a  penalty  of  5  per  centum, 
together  with  interest  at  the  rate  of  1  per 
centum  for  each  full  month,  from  the  time 
when  the  tax  became  due. 

Positive  Motion-Picture  Films. 

Sec.  906.  That  on  and  after  the  1st  day  of 
May,  1919,  any  person  engaged  in  the  busi¬ 
ness  of  leasing  or  licensing  for  exhibition 
positive  motion-picture  films  containing  pic¬ 
tures  ready  for  projection  shall  pay  month¬ 
ly  an  excise  tax  in  respect  to  carrying  on 
such  business  equal  to  5  per  centum  of  the 
total  rentals  earned  from  each  such  lease  or 
license  during  the  preceding  month.  If  a 
person  owning  such  a  film  exhibits  it  for 
profit  he  shall  pay  a  tax  equivalent  to  5  per 
centum  of  the  fair  rental  or  license  value  of 
such  film  at  the  time  and  place  where  and 
for  the  period  during  which  exhibited.  If 
any  such  person  has,  prior  to  December  6, 
1918,  made  a  bona  fide  contract  with  any 
person  for  the  lease  or  licensing,  after  the 
tax  imposed  by  this  section  takes  effect,  of 
such  a  film  for  exhibition  for  profit,  and  if 
such  contract  does  not  permit  the  adding  of 
the  whole  of  the  tax  imposed  by  this  section 
to  the  amount  to  be  paid  under  such  con¬ 
tract,  then  the  lessee  or  licensee  shall,  in  lieu 
of  the  lessor  or  licensor,  pay  so  much  of  such 
tax  as  is  not  so  permitted  to  be  added  to  the 


contract  price.  The  tax  imposed  by  this 
section  shall  be  in  lieu  of  the  tax  imposed 
by  subdivisions  (c)  and  (d)  of  section  600 
of  the  Revenue  Act  of  1917. 

Toilet  Articles — Proprietary  Medicines. 

Sec.  907.  (a)  That  on  and  after  May  1, 
1919,  there  shall  be  levied,  assessed,  col¬ 
lected  and  paid  (in  lieu  of  the  taxes  imposed 
by  subdivisions  (g)  and  (h)  of  section  600 
of  the  Revenue  Act  of  1917)  a  tax  of  1  cent 
for  each  25  cents  or  fraction  thereof  of  the 
amount  paid  for  any  of  the  following  ar¬ 
ticles  when  sold  by  or  for  a  dealer  or  his  es¬ 
tate  on  or  after  such  date  for  consumption 
or  use: 

(1)  Perfumes,  essences,  extracts,  toilet 
waters,  cosmetics,  petroleum  jellies,  hair 
oils,  pomades,  hair  dressings,  hair  restora¬ 
tives,  hair  dyes,  tooth  and  mouth  washes, 
dentifrices,  tooth  pastes,  aromatic  cachous, 
toilet  powders  (other  than  soap  powders), 
or  any  similar  substance,  article,  or  prepara¬ 
tion  by  whatsoever  name  known  or  distin¬ 
guished,  any  of  the  above  which  are  used  or 
applied  or  intended  to  be  used  or  applied  for 
toilet  purposes ; 

(2)  Pills,  tablets,  powders,  tinctures, 
troches  or  lozenges,  sirups,  medicinal  cor¬ 
dials  or  bitters,  anodynes,  tonics,  plasters, 
liniments,  salves,  ointments,  pastes,  drops, 
waters  (except  those  taxed  under  section 
628  of  this  Act),  essences,  spirits,  oils,  and 
other  medicinal  preparations,  compounds,  or 
compositions  (not  including  serums  and 
antitoxins),  upon  the  amount  paid  for  any 
of  the  above  as  to  which  the  manufacturer 
or  producer  claims  to  have  any  private  for¬ 
mula,  secret,  or  occult  art  for  making  or  pre¬ 
paring  the  same,  or  has  or  claims  to  have 
any  exclusive  right  or  title  to  the  making 
or  preparing  the  same,  or  which  are  pre¬ 
pared,  uttered,  vended,  or  exposed  for  sale 
under  any  letters  patent,  or  trade-mark,  or 
which  (if  prepared  by  any  formula,  pub¬ 
lished  or  unpublished)  are  held  out  or  rec¬ 
ommended  to  the  public  by  the  makers,  ven¬ 
dors,  or  proprietors  thereof  as  proprietary 
medicines  or  medicinal  proprietary  articles 
or  preparations,  or  as  remedies  or  specifics 

—133— 


for  any  disease,  diseases,  or  affection  what¬ 
ever  affecting  the  human  or  animal  body : 
Provided,  That  the  provisions  of  this  sec¬ 
tion  shall  not  apply  to  the  sale  of  vaccines 
and  bacterines  which  are  not  advertised  to 
the  general  lay  public,  nor  to  the  sale  by  a 
physician  in  personal  attendance  upon  a  pa¬ 
tient  of  medicinal  preparations  not  so  ad¬ 
vertised. 

Method  of  Collection  Optional  With 
Commissioner. 

(b)  The  taxes  imposed  by  this  section 
shall  be  collected  by  whichever  of  the  fol¬ 
lowing  methods  the  Commissioner  may 
deem  expedient:  (1)  by  stamp  affixed  to 
such  article  by  the  vendor,  the  cost  of 
which  shall  be  reimbursed  to  the  vendor  by 
the  purchaser ;  or  (2)  by  payment  to  the 
vendor  by  the  purchaser  at  the  time  of  the 
sale,  the  taxes  so  collected  being  returned 
and  paid  to  the  United  States  by  such  ven¬ 
dor  in  the  same  manner  as  provided  in  sec¬ 
tion  502. 

TITLE  X.— SPECIAL  TAXES 
CAPITAL  TAX. 

Sec.  1000.  (a)  That  on  and  after  July  1, 
1918,  in  lieu  of  the  tax  imposed  by  the  first 
subdivision  of  section  407  of  the  Revenue 
Act  of  1916 — - 

Domestic  Corporation. 

(1)  Every  domestic  corporation  shall  pay 
annually  a  special  excise  tax  with  respect  to 
carrying  on  or  doing  business,  equivalent  to 
$1  for  each  $1,000  of  so  much  of  the  fair 
average  value  of  its  capital  stock  for  the  pre¬ 
ceding  year  ending  June  thirtieth  as  is  in  ex¬ 
cess  of  $5,000.  In  estimating  the  value  of 
capital  stock  the  surplus  and  undivided  prof¬ 
its  shall  be  included ; 

Foreign  Corooration. 

(2)  Every  foreign  corporation  shall  pay 
annually  a  special  excise  tax  with  respect 
to  carrying  on  or  doing  business  in  the 
United  States,  equivalent  to  $1  for  each 
$1,000  of  the  average  amount  of  capital  em- 

—134— 


ployed  in  the  transaction  of  its  business  in 
the  United  States  during  the  preceding  year 
ending  June  thirtieth. 

Insurance  Companies. 

(b)  In  computing  the  tax  in  the  case  of 
insurance  companies  such  deposits  and  re¬ 
serve  funds  as  they  are  required  by  law  or 
contract  to  maintain  or  hold  for  the  pro¬ 
tection  of  or  payment  to  or  apportionment 
among  policyholders  shall  not  be  included. 

When  Tax  Not  Applicable. 

(c)  The  taxes  imposed  by  this  section 
shall  not  apply  in  any  year  to  any  corpora¬ 
tion  which  was  not  engaged  in  business  (or 
in  the  case  of  a  foreign  corporation  not  en¬ 
gaged  in  business  in  the  United  States)  dur¬ 
ing  the  preceding  year  ending  June  30,  nor 
to  any  corporation  enumerated  in  section 
231.  The  taxes  imposed  by  this  section  shall 
apply  to  mutual  insurance  companies,  and 
in  the  case  of  every  such  domestic  company 
the  tax  shall  be  equivalent  to  $1  for  each 
$1,000  of  the  excess  over  $5,000  of  the  sum 
of  its  surplus  or  contingent  reserves  main¬ 
tained  for  the  general  use  of  the  business 
and  anv  reserves  the  net  additions  to  which 
are  included  in  net  income  under  the  pro¬ 
visions  of  Title  II,  as  of  the  close  of  the  pre¬ 
ceding  accounting  period  used  by  such  com¬ 
pany  for  purposes  of  making  its  income  tax 
return :  Provided,  That  in  the  case  of  a  for¬ 
eign  mutual  insurance  company  the  tax  shall 
be  equivalent  to  $1  for  each  $1,000  of  the 
same  proportion  of  the  sum  of  such  surplus 
and  reserves,  which  the  reserve  fund  upon 
business  transacted  within  the  United  States 
is  of  the  total  reserve  upon  all  business 
transacted,  as  of  the  close  of  the  preceding 
accounting  period  used  by  such  company 
for  purposes  of  making  its  income  tax  re¬ 
turn. 

(d)  Section  257  shall  apply  to  all  returns 
filed  with  the  Commissioner  for  purposes  of 
the  tax  imposed  by  this  section. 

Brokers,  Pawnbrokers,  Shipbrokers  and 
Customhouse  Brokers  Defined — 
Taxes  Assessed. 

Sec.  1001.  That  on  and  after  January 

—135— 


1,  1919,  there  shall  be  levied,  collected,  and 
paid  annually,  the  following  special  taxes — 

(1)  Brokers  shall  pay  $50.  Every  person 
whose  business  it  is  to  negotiate  purchases 
or  sales  of  stocks,  bonds,  exchange,  bullion,  | 
coined  money,  bank  notes,  promissory  notes, 
other  securities,  produce  or  merchandise,  for 
others,  shall  be  regarded  as  a  broker.  If  a 
broker  is  a  member  of  a  stock  exchange, 
or  if  he  is  a  member  of  any  produce  ex¬ 
change,  board  of  trade,  or  similar  organiza¬ 
tion,  where  produce  or  merchandise  is  sold, 
he  shall  pay  an  additional  amount  as  fol¬ 
lows  :  If  the  average  value,  during  the  pre¬ 
ceding  year  ending  June  30,  of  a  seat  or 
membership  in  such  exchange  or  organiza¬ 
tion  was  $2,000  or  more  but  not  more  than 
$5,000,  $100;  if  such  value  was  more  than 
$5,000,  $150. 

(2)  Pawnbrokers  shall  pay  $100.  Every 
person  whose  business  or  occupation  it  is  to 
take  or  receive,  by  way  of  pledge,  pawn,  or 
exchange,  any  goods,  wares,  or  merchandise, 
or  any  kind  of  personal  property  whatever, 
as  security  for  the  repayment  of  money 
loaned  thereon,  shall  be  regarded  as  a  pawn 
broker. 

(3)  Ship  brokers  shall  pay  $50.  Every 
person  whose  business  it  is  as  a  broker  to 
negotiate  freights  and  other  business  for 
the  owners  of  vessels,  or  for  the  shippers  or 
consignors  or  consignees  of  freight  carried 
by  vessels,  shall  be  regarded  as  a  ship 
broker. 

(4)  Customhouse  brokers  shall  pay  $50. 
Every  person  whose  occupation  it  is,  as  the 
agent  of  others,  to  arrange  entries  and  other 
customhouse  papers,  or  transact  business  at 
any  port  of  entry  relating  to  the  importa¬ 
tion  or  exportation  of  goods,  wares,  or  mer¬ 
chandise,  shall  be  regarded  as  a  custom¬ 
house  broker. 

Theatres,  Museums  and  Concert  Halls — 
Schedule  of  Taxes — When  Exempt — 
Less  in  Smaller  Towns. 

(5)  Proprietors  of  theatres,  museums,  and 
concert  halls,  where  a  charge  for  admission 
is  made,  having  a  seating  capacity  of  not 
more  than  two  hundred  and  fifty,  shall  pay 
$50;  having  a  seating  capacity  of  more  than 

— 136 — 


two  hundred  and  fifty  and  not  exceeding  five 
hundred,  shall  pay  $100;  having  a  seating, 
capacity  exceeding  five  hundred  and  not  ex¬ 
ceeding  eight  hundred,  shall  pay  $150;  hav¬ 
ing  a  seating  capacity  of  more  than  eight 
hundred,  shall  pay  $200.  Every  edifice  used 
for  the  purpose  of  dramatic  or  operatic  or 
other  representations,  plays,  or  perform¬ 
ances,  for  admission  to  which  entrance 
money  is  received,  not  including  halls  or 
armories  rented  or  used  occasionally  for 
concerts  or  theatrical  representations,  and 
not  including  edifices  owned  by  religious, 
educational  or  charitable  institutions,  socie¬ 
ties  or  organizations  where  all  the  proceeds 
from  admissions  inure  exclusively  to  the 
benefit  of  such  institutions,  societies  or  or¬ 
ganizations  or  exclusively  to  the  benefit  of 
persons  in  the  military  or  naval  forces  of 
the  CJnited  States,  shall  be  regarded  as  a 
theatre :  Provided,  That  in  cities,  towns,  or 
villages  of  five  thousand  inhabitants  or  less 
the  amount  of  such  payment  shall  be  one- 
half  of  that  above  stated :  Provided  further, 
That  whenever  any  such  edifice  is  under 
lease  at  the  time  the  tax  is  due.  the  tax  shall 
be  paid  by  the  lessee  unless  otherwise  stipu¬ 
lated  between  the  parties  to  the  lease. 

Circuses. 

(6)  The  proprietor  or  proprietors  of  cir¬ 
cuses  shall  pay  $100.  Every  building,  space, 
tent,  or  area,  where  feats  of  horsemanship  or 
acrobatic  sports  or  theatrical  performances 
not  otherwise  provided  for  in  this  section 
are  exhibited  shall  be  regarded  as  a  circus : 
Provided,  That  no  special  tax  paid  in  one 
State,  Territory,  or  the  District  of  Colum¬ 
bia  shall  exempt  exhibitions  from  the  tax 
in  another  State,  Territory,  or  the  District 
of  Columbia,  and  but  one  special  tax  shall 
be  imposed  for  exhibitions  within  any  one 
State,  Territory,  or  District. 

Other  Public  Exhibitions — Exemptions. 

(7)  Proprietors  or  agents  of  all  other  pub' 
lie  exhibitions  or  shows  for  money  not 
enumerated  in  this  section  shall  pay  $15: 
Proznded,  That  a  special  tax  paid  in  one 
State,  Territory,  or  the  District  of  Columbia 
shall  not  exempt  exhibitions  from  the  tax  in 

—137— 


another  State,  Territory,  or  the  District  of 
Columbia,  and  but  one  special  tax  shall  be 
required  for  exhibitions  within  any  one 
State,  Territory,  or  the  District  of  Colum¬ 
bia  :  Provided  further,  That  this  paragraph 
shall  not  apply  to  Chautauquas,  lecture 
lyceums,  agricultural  or  industrial  fairs,  or 
exhibitions  held  under  the  auspices  of  re¬ 
ligious  or  charitable  associations :  Provided 
further,  That  an  aggregation  of  entertain¬ 
ments,  known  as  a  street  fair,  shall  not  pay 
a  larger  tax  than  $100  in  any  State,  Terri¬ 
tory,  or  in  the  District  of  Columbia. 

Bowling  Alleys  and  Billiard  Rooms. 

(8)  Proprietors  of  bowling  alleys  and  bil¬ 
liard  rooms  shall  pay  $10  for  each  alley  or 
table.  Every  building  or  place  where  bowls 
are  thrown  or  where  games  of  billiards  or 
pool  are  played,  except  in  private  homes, 
shall  be  regarded  as  a  bowling  alley  or  a 
billiard  room,  respectively. 

Shooting  Galleries. 

charge  of  firearms  at  any  form  of  target  shall 
pay  $20.  Every  building,  space,  tent,  or 
area,  where  a  charge  is  made  for  the  dis¬ 
charge  of  firearms  at  any  form  of  target  shall 
be  regarded  as  a  shooting  gallery. 

Riding  Academies. 

(10)  Proprietors  of  riding  academies  shall 
pay  $100.  Every  building,  space,  tent,  or 
area,  where  a  charge  is  made  for  instruction 
in  horsemanship  or  for  facilities  for  the  prac¬ 
tice  of  horsemanship  shall  be  regarded  as  a 
riding  academy. 

Autos  for  Hire. 

(11)  Persons  carrying  on  the  business  of 
operating  or  renting  passenger  automobiles 
for  hire  shall  pay  $10  for  each  such  auto¬ 
mobile  having  a  seating  capacity  of  more 
than  two  and  not  more  than  seven,  and  $20 
for  each  such  automobile  having  a  seating 
capacity  of  more  than  seven. 

Brewer,  Distiller,  Dealer — Additional  Tax 

in  Dry  States. 

(12)  Every  person  carrying  on  the  busi¬ 
ness  of  a  brewer,  distiller,  wholesale  liquor 
dealer,  retail  liquor  dealer,  wholesale  dealer 
in  malt  liquor,  retail  dealer  in  malt  liquor, 

—138— 


or  manufacturer  of  stills,  as  defined  in  sec¬ 
tion  3244  as  amended  and  section  3247  of 
the  Revised  Statutes,  in  any  State,  Territory, 
or  District  of  the  United  States  contrary  to 
the  laws  of  such  State,  Territory,  or  District, 
or  in  any  place  therein  in  which  carrying  on 
such  business  is  prohibited  by  local  or  mu¬ 
nicipal  law,  shall  pay,  in  addition  to  all  other 
taxes,  special  or  otherwise,  imposed  by  ex¬ 
isting  law  or  by  this  Act,  $1,000. 

Payment  of  Tax  No  Exemption  from  State 

Penalties. 

The  payment  of  the  tax  imposed  by  this 
subdivision  shall  not  be  held  to  exempt  any 
person  from  any  penalty  or  punishment  pro¬ 
vided  for  by  the  laws  of  any  State,  Terri¬ 
tory,  or  District  for  carrying  on  such  busi¬ 
ness  in  such  State,  Territory,  or  District,  or 
in  any  manner  to  authorize  the  commence¬ 
ment  or  continuance  of  such  business  con¬ 
trary  to  the  laws  of  such  State,  Territory, 
or  District,  or  in  places  prohibited  by  local 
or  municipal  law. 

The  taxes  imposed  by  this  section  shall,  in 
the  case  of  persons  upon  whom  a  corre¬ 
sponding  tax  is  imposed  by  section  407  of 
the  Revenue  Act  of  1916,  be  in  lieu  of  such 
tax. 


Manufacturers  of  Tobacco. 

Sec.  1002.  That  on  and  after  January  1, 
1919,  there  shall  be  levied,  collected,  and 
paid  annually,  in  lieu  of  the  taxes  imposed 
by  section  408  of  the  Revenue  Act  of  1916, 
the  following  special  taxes,  the  amount  of 
such  taxes  to  be  computed  on  the  basis  of 
the  sales  for  the  preceding  year  ending  [une 
30- 

Manufacturers  of  tobacco  whose  annual 
sales  do  not  exceed  fifty  thousand  pounds 
shall  each  pay  $6; 

Manufacturers  of  tobacco  whose  annual 
sales  exceed  fifty  thousand  and  do  not  ex¬ 
ceed  one  hundred  thousand  pounds  shall 
each  pay  $12; 

Manufacturers  of  tobacco  whose  annual 
sales  exceed  one  hundred  thousand  and  do 
not  exceed  two  hundred  thousand  pounds 
shall  each  pay  $24 ; 

—139— 


Manufacturers  of  tobacco  whose  annual 
sales  exceed  two  hundred  thousand  pounds 
shall  each  pay  $24,  and  at  the  rate  of  16 
cents  per  thousand  pounds,  or  fraction 
thereof,  in  respect  to  the  excess  over  two 
hundred  thousand  pounds ; 

Cigars, 

Manufacturers  of  cigars  whose  annual 
sales  do  not  exceed  fifty  thousand  cigars 
shall  each  pay  $4 ; 

Manufacturers  of  cigars  whose  annual 

sales  exceed  fifty  thousand  and  do  not  ex¬ 
ceed  one  hundred  thousand  cigars  shall  each 
pay  $6; 

Manufacturers  of  cigars  whose  annual 

sales  exceed  one  hundred  thousand  and  do 
not  exceed  two  hundred  thousand  cigars 
shall  each  pay  $12; 

Manufacturers  of  cigars  whose  annual 

sales  exceed  two  hundred  thousand  and  do 
not  exceed  four  hundred  thousand  cigars 
shall  each  pay  $24; 

Manufacturers  of  cigars  whose  annual 

sales  exceed  four  hundred  thousand  cigars 
shall  each  pay  $24,  and  at  the  rate  of  10 
cents  per  thousand  cigars,  or  fraction 
thereof,  in  respect  to  the  excess  over  four 
hundred  thousand  cigars; 

Cigarettes.  •••  : 

Manufacturers  of  cigarettes,  including 
small  cigars  weighing  not  more  than  three 
pounds  per  thousand,  shall  each  pay  at  the 
rate  of  6  cents  for  every  ten  thousand  ciga¬ 
rettes,  or  fraction  thereof. 

Manufacturer  Within  Each  Class. 

In  arriving  at  the  amount  of  special  tax 
to  be  paid  under  this  section,  and  in  the 
levy  and  collection  of  such  tax,  each  person 
engaged  in  the  manufacture  of  more  than 
one  of  the  classes  of  articles  specified  in  this 
section  shall  be  considered  and  deemed  a 
manufacturer  of  each  class  separately. 

Yachts,  Pleasure,  Power  and  Sailing  Boats 

— Schedule. 

< 

Sec.  1003.  That  sixty  days  after  the  pas¬ 
sage  of  this  Act,  and  thereafter  on  July  1 
in  each  year,  and  also  at  the  time  of  the 

—140— 


original  purchase  of  a  new  boat  by  a  user, 
if  on  any  other  date  than  July  1,  there  shall 
be  levied  assessed,  collected,  and  paid  in  lieu 
of  the  tax  imposed  by  section  603  of  the 
Revenue  Act  of  1917,  upon  the  use  of  yachts, 
pleasure  boats,  power  boats,  and  sailing 
boats,  of  over  five  net  tons,  and  motor  boats 
with  fixed  engines,  not  used  exclusively  for 
trade,  fishing  or  national  defense,  or  not  built 
according  to  plans  and  specifications  ap¬ 
proved  by  the  Navy  Department,  a  special 
excise  tax  to  be  based  on  each  yacht  or  boat, 
at  rates  as  follows:  Yachts,  pleasure  boats, 
power  boats,  motor  boats  with  fixed  engines, 
and  sailing  boats,  of  over  five  net  tons, 
length  not  over  fifty  feet,  $1  for  each  foot; 
length  over  fifty  feet  and  not  over  one  hun¬ 
dred  feet,  $2  for  each  foot;  length  over  one 
hundred  feet.  $4  for  each  foot;  motor  boats 
of  not  over  five  net  tons  with  fixed  engines, 
$10. 

Tn  determining  the  length  of  such  yachts, 
pleasure  boats,  power  boats,  motor  boats 
with  fixed  engines,  and  sailing  boats,  the 
measurement  of  over-all  length  shall  govern. 

Apportionment  of  Tax. 

In  the  case  of  a  tax  imposed  at  the  time 
of  the  original  purchase  of  a  new  boat  on 
any  other  date  than  July  1,  and  in  the  case 
of  the  tax  taking  effect  sixty  days  after  the 
passage  of  this  Act,  the  amount  to  be  paid 
shall  be  the  same  number  of  twelfths  of  the 
amount  of  the  tax  as  the  number  of  calendar 
months  (including  the  month  of  sale,  or  the 
month  in  which  is  included  the  sixty-first 
day  after  the  passage  of  this  Act,  as  the  case 
may  be)  remaining  prior  to  the  following 
July  1. 

Taxes  Paid,  a  Credit. 

If  the  tax  imposed  by  section  603  of  the 
Revenue  Act  of  1917,  for  the  fiscal  year  end¬ 
ing  June  30,  1919,  has  been  paid  in  respect 
to  the  use  of  any  boat,  the  amount  so  paid 
shall  under  such  regulations  as  the  Commis¬ 
sioner,  with  the  approval  of  the  Secretary, 
may  prescribe,  be  credited  upon  the  first  tax 
due  under  this  section  in  respect  to  the  use 
of  such  boat,  or  be  refunded  to  the  person 
paying  the  first  tax  imposed  by  this  section 
in  respect  to  the  use  of  such  boat. 

—141— 


Use  of  Receipts. 

Sec.  1004.  That  if  the  tax  imposed  by  sec¬ 
tion  407  or  408  of  the  Revenue  Act  of  1916, 
for  the  fiscal  year  ending  June  30,  1919,  has 
been  paid  by  any  person  subject  to  the  cor¬ 
responding  tax  imposed  by  this  title,  col¬ 
lectors  may  issue  a  receipt  in  lieu  of  special 
tax  stamp  for  the  amount  by  which  the  tax 
under  this  title  is  in  excess  of  that  paid  or 
payable  and  evidenced  by  stamp  under  the 
Revenue  Act  of  1916.  Such  receipt  shall  be 
posted  as  in  the  case  of  the  special  tax 
stamp,  as  provided  by  law,  and  with  it,  with¬ 
in  the  place  of  business  of  the  taxpayer. 

Credit. 

If  the  corresponding  tax  imposed  by  sec¬ 
tion  407  of  the  Revenue  Act  of  1916  was  not 
payable  by  stamp,  the  amount  paid  under 
such  section  for  any  period  for  which  a  tax  is 
also  imposed  by  this  title  may  be  credited 
against  the  tax  imposed  by  this  title. 

Penalty. 

Sec.  1005.  That  any  person  who  carries 
on  any  business  or  occupation  for  which  a 
special  tax  is  imposed  by  sections  1000,  1001, 
or  1002,  without  having  paid  the  special  tax 
therein  provided,  shall,  besides  being  liable 
for  the  payment  of  such  special  tax,  be  sub¬ 
ject  to  a  penalty  of  not  more  than  $1,000  or 
to  imprisonment  for  not  more  than  one  year, 
or  both. 

Opium,  Coca  Leaves — Registration  of  Per¬ 
sons  Engaged,  and  Place  of  Business. 

Sec.  1006.  That  section  1  of  the  Act  of 
Congress  approved  December  17,  1914,  is 
hereby  amended  to  read  as  follows : 

“Section  1.  That  on  or  before  July  1  of 
each  year  every  person  who  imports,  manu¬ 
factures,  produces,  compounds,  sells,  deals 
in,  dispenses,  or  gives  away  opium  or  coca 
leaves,  or  any  compound  manufacture,  salt, 
derivative,  or  preparation  thereof,  shall 
register  with  the  collector  of  internal  reve¬ 
nue  of  the  district  his  name  or  style,  place 
of  business  and  place  or  places  where  such 
business  is  to  be  carried  on,  and  pay  the 
special  taxes  hereinafter  provided; 

“Every  person  who  on  January  1,  1919,  is 
enRaged  in  any  of  the  activities  above  enum- 

—142— 


erated,  or  who  between  such  date  and  the 
passage  of  this  Act  first  engages  in  any  of 
such  activities,  shall  within  30  days  after 
the  passage  of  this  Act  make  like  registra¬ 
tion,  and  shall  pay  the  proportionate  part 
of  the  tax  for  the  period  ending  Tune  30, 
1919;  and 

“Every  person  who  first  engages  in  any  of 
such  activities  after  the  passage  of  this  Act 
shall  immediately  make  like  registration  and 
pay  the  proportionate  part  of  the  tax  for 
the  period  ending  on  the  following  Tune 
30th ; 

Schedule. 

“Importers,  manufacturers,  producers,  or 
compounders,  $24  per  annum ;  wholesale 
dealers,  $12  per  annum ;  retail  dealers,  $6  per 
annum  ;  physicians,  dentist,  veterinary  sur¬ 
geons,  and  other  practitioners  lawfully  en¬ 
titled  to  distribute,  dispense,  give  away,  or 
administer  any  of  the  aforesaid  drugs  to  pa¬ 
tients  upon  whom  they  in  the  course  of  their 
professional  practice  are  in  attendance,  shall 
pay  $3  per  annum. 

Definitions  of  Terms. 

“Every  person  who  imports,  manufac¬ 
tures,  compounds,  or  otherwise  produces  for 
sale  or  distribution  any  of  the  aforesaid 
drugs  shall  be  deemed  to  be  an  importer, 
manufacturer,  or  producer. 

“Every  person  who  sells  or  offers  for  sale 
any  of  said  drugs  in  the  original  stamped 
packages,  as  hereinafter  provided,  shall  be 
deemed  a  wholesale  dealer. 

Registration  Exceptions. 

“Every  person  who  sells  or  dispenses  from 
original  stamped  packages,  as  hereinafter 
provided,  shall  be  deemed  a  retail -dealer : 
Provided,  That  the  office,  or  if  none,  the  resi¬ 
dence,  of  any  person  shall  be  considered  for 
the  purpose  of  this  Act  his  place  of  business ; 
but  no  employee  of  any  person  who  has 
registered  and  paid  special  tax  as  herein  re¬ 
quired,  acting  within  the  scope  of  his  em¬ 
ployment,  shall  be  required  to  register  and 
pay  special  tax  provided  by  this  section : 
Provided  further,  That  officials  of  the  United 
States,  Territorial,  District  of  Columbia,  or 
insular  possessions,  State  or  municipal  gov- 

— 143 — 


ernments,  who  in  the  exercise  of  their  offi¬ 
cial  duties  engage  in  any  of  the  business 
herein  described,  shall  not  be  required  to 
register,  nor  pay  special  tax,  nor  stamp  the 
aforesaid  drugs  as  hereinafter  prescribed, 
but  their  right  to  this  exemption  shall  be 
evidenced  in  such  manner  as  the  Commis¬ 
sioner  of  Internal  Revenue,  with  the  ap¬ 
proval  of  the  Secretary  of  the  Treasury,  may 
by  regulations  prescribe. 

Unlawful  Operation. 

“It  shall  be  unlawful  for  any  person  re¬ 
quired  to  register  under  the  provisions  of 
this  Act  to  import,  manufacture,  produce, 
compound,  sell,  deal  in,  dispense,  distribute, 
administer,  or  give  away  any  of  the  afore¬ 
said  drugs  without  having  registered  and 
paid  the  special  tax  as  imposed  by  this  sec¬ 
tion. 


Person  Defined. 

“That  the  word  ‘person’  as  used  in  this 
Act  shall  be  construed  to  mean  and  include 
a  partnership,  association,  company,  or  cor¬ 
poration,  as  well  as  a  natural  person ;  and  all 
provisions  of  existing  law  relating  to  special 
taxes,  as  far  as  necessary,  are  hereby  ex¬ 
tended  and  made  applicable  to  this  section. 

Tax  on  Products. 

“That  there  shall  be  levied,  assessed,  col¬ 
lected,  and  paid  upon  opium,  coca  leaves, 
any  compound,  salt,  derivative,  or  prepara¬ 
tion  thereof,  produced  in  or  imported  into 
the  United  States,  and  sold,  or  removed  for 
consumption  or  sale,  an  internal-revenue  tax 
at  the  rate  of  1  cent  per  ounce,  and  any  frac¬ 
tion  of  an  ounce  in  apackage  shall  be  taxed 
as  an  ounce,  such  tax  to  be  paid  by  the  im¬ 
porter,  manufacturer,  producer,  or  com¬ 
pounder  thereof,  and  to  be  represented  by 
appropriate  stamps,  to  be  provided  by  the 
Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury; 
and  the  stamps  herein  provided  shall  be  so 
affixed  to  the  bottle  or  other  container  as  to 
securely  seal  the  stopper,  covering,  or  wrap¬ 
per  thereof. 


144 


Additional  to  Import  Duty. 

‘‘The  tax  imposed  by  this  section  shall  be 
in  addition  to  any  import  duty  imposed  on 
the  aforesaid  drugs. 

Unlawful  Acts — Prima  Facie  Evidence — 

Exceptions. 

“It  shall  be  unlawful  for  any  person  to 
purchase,  sell,  dispense,  or  distribute  any  of 
the  aforesaid  drugs  except  in  the  original 
stamped  package  or  from  the  original 
stamped  package ;  and  the  absence  of  appro¬ 
priate  tax-paid  stamps  from  any  of  the 
aforesaid  drugs  shall  be  prima  facie  evidence 
of  a  violation  of  this  section  by  the  person 
in  whose  possession  same  may  be  found; 
and  the  possession  of  any  original  stamped 
package  containing  any  of  the  aforesaid 
drugs  by  any  person  who  has  not  registered 
and  paid  special  taxes  as  required  by  this 
section  shall  be  prima  facie  evidence  of  lia¬ 
bility  to  such  special  tax:  Provided,  That 
the  provisions  of  this  paragraph  shall  not 
apply  to  any  person  having  in  his  or  her 
possession  any  of  the  aforesaid  drugs  which 
have  been  obtained  from  a  registered  dealer 
in  pursuance  of  a  prescription,  written  for 
legitimate  medical  uses,  issued  by  a  physi- 
where  the  bottle  or  other  container  in  which 
such  drug  may  be  put  up  by  the  dealer  upon 
said  prescription  bears  the  name  and  registry 
number  of  the  druggist,  serial  number  of 
prescription,  name  and  address  of  the  pa¬ 
tient,  and  name,  address,  and  registry  num¬ 
ber  of  the  person  writing  said  prescription ; 
or  to  the  dispensing,  or  administration  or 
giving  away  of  any  of  the  aforesaid  drugs  to 
a  patient  by  a  registered  physician,  dentist, 
veterinary  surgeon,  or  other  practitioner  in 
the  course  of  his  professional  practice,  and 
where  said  drugs  are  dispensed  or  adminis¬ 
tered  to  the  patient  for  legitimate  medical 
purposes,  and  the  record  kept  as  required  by 
this  Act  of  the  drugs  so  dispensed,  adminis¬ 
tered.  distributed,  or  given  away. 

Disposition  of  Stamps. 

“And  all  the  provisions  of  existing  laws 
relating  to  the  engraving,  issuance,  sale,  ac¬ 
countability,  cancellation,  and  destruction  of 
tax-paid  stamps  provided  for  in  the  internal- 

—145— 


revenue  laws  are,  in  so  far  as  necessary, 
hereby  extended  and  made  to  apply  to 
stamps  provided  by  this  section. 

Unstamped  Packages  Forfeited. 

“That  all  unstamped  packages  of  the 
aforesaid  drugs  found  in  the  possession  of 
any  person,  except  as  herein  provided,  shall 
be  subject  to  seizure  and  forfeiture,  and  all 
the  provisions  of  existing  internal-revenue 
laws  relating  to  searches,  seizures,  and  for¬ 
feitures  of  unstamped  articles  are  hereby  ex¬ 
tended  to  and  made  to  apply  to  the  articles 
taxed  under  this  Act  and  the  persons  upon 
whom  these  taxes  are  imposed. 

Records  Kept  and  Monthly  Returns 
Rendered. 

“Importers,  manufacturers,  and  wholesale 
dealers  shall  keep  such  books  and  records 
and  render  such  monthly  returns  in  relation 
to  the  transactions  in  the  aforesaid  drugs  as 
the  Commissioner  of  Internal  Revenue,  with 
the  approval  of  the  Secretary  of  the  Treas¬ 
ury,  may  by  regulations  require. 

“The  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the 
Treasury,  shall  make  all  needful  rules  and 
regulations  for  carrying  the  provisions  of 
this  Act  into  effect.” 

Provisions  Not  Applicable  to  Preparations 
Containing  Minute  Quantities,  or  for 
External  Use — Evasion. 

Sec.  1007.  That  section  6  of  such  Act  of 
December  17,  1914,  is  hereby  amended  to 
read  as  follows: 

“Sec.  6.  That  the  provisions  of  this  Act 
shall  not  be  construed  to  apply  to  the  manu¬ 
facture,  sale,  distribution,  giving  away,  dis¬ 
pensing,  or  possession  of  preparations  and 
remedies  which  do  not  contain  more  than 
two  grains  of  opium,  or  more  than  one- 
fourth  of  a  grain  of  morphine,  or  more  than 
one-eighth  of  a  grain  of  heroin,  or  more  than 
one  grain  of  codeine,  or  any  salt  or  deriva¬ 
tive  of  any  of  them  in  one  fluid  ounce,  or, 
if  a  solid  or  semisolid  preparation,  in  one 
avoirdupois  ounce;  or  to  liniments,  oint¬ 
ments,  or  other  preparations  which  are  pre¬ 
pared  for  external  use, only,  except  liniments, 
ointments,  and  other  preparations  which 
contain  cocaine  or  any  of  its  salts  or  alpha 

—146— 


or  beta  eucaine  or  any  of  their  salts  or  any 
synthetic  substitute  for  them:  Provided, 
That  such  remedies  and  preparations  are 
manufactured,  sold,  distributed,  given  away, 
dispensed,  or  possessed  as  medicines  and  not 
for  the  purpose  of  evading  the  intentions  and 
provisions  of  this  act:  Provided  further, 
That  any  manufacturer,  producer,  com¬ 
pounder,  or  vendor  (including  dispensing 
physicians)  of  the  preparations  and  reme¬ 
dies  mentioned  in  this  section  shall  keep  a 
record  of  all  sales,  exchanges,  or  gifts  of  such 
preparations  and  remedies  in  such  manner 
as  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the 
Treasury,  shall  direct.  Such  record  shall  be 
preserved  for  a  period  of  two  years  in  such 
a  way  as  to  be  readily  accessible  to  inspec¬ 
tion  by  any  officer,  agent  or  employee  of  the 
Treasury  Department  duly  authorized  for 
that  purpose,  and  the  State,  Territorial,  Dis¬ 
trict,  Municipal,  and  Insular  officers  named 
in  section  5  of  this  Act,  and  every  such  per¬ 
son  so  possessing  or  disposing  of  such 
preparations  and  remedies  shall  register  as 
required  in  section  1  of  this  Act  and,  if  he 
is  not  paying  a  tax  under  this  Act,  he  shall 
pay  a  special  tax  of  $1  for  each  year,  or  frac¬ 
tional  part  thereof,  in  which  he  is  engaged 
in  such  occupation,  to  the  collector  of  in¬ 
ternal  revenue  of  the  district  in  which  he 
carries  on  such  occupation  as  provided  in 
this  Act.  The  provisions  of  this  Act  as 
amended  shall  not  aply  to  decocainized  coca 
leaves  or  preparations  made  therefrom,  or 
to  other  preparations  of  coca  leaves  which 
do  not  contain  cocaine.” 

Drugs  Seized — Disposition. 

Sec.  1008.  That  all  opium,  its  salts,  de¬ 
rivatives,  and  compounds,  and  coca  leaves, 
salts,  derivatives,  and  compounds  thereof, 
which  may  now  be  under  seizure  or  which 
may  hereafter  be  seized  by  the  United  States 
Government  from  any  person  or  persons 
charged  with  any  violation  of  the  Act  of  Oc¬ 
tober  1,  1890,  as  amended  bv  the  Acts  of 
March  3,  1897,  February  9,  1909,  and  Jan¬ 
uary  17.  1914,  or  the  Act  of  December  17, 
1914,  shall  upon  conviction  of  the  person  or 
persons  from  whom  seized  be  confiscated  by 
and  forfeited  to  the  United  States:  and  the 

—147— 


Secretary  is  hereby  authorized  to  deliver  for 
medical  or  scientific  purposes  to  any  depart¬ 
ment,  bureau,  or  other  agency  of  the  United 
States  Government,  upon  proper  application 
therefor  under  such  regulation  as  may  be 
prescribed  by  the  Commissioner,  with  the 
approval  of  the  Secretary,  any  of  the  drugs 
so  seized,  confiscated,  and  forfeited  to  the 
United  States. 

The  provisions  of  this  section  shall  also 
apply  to  any  of  the  aforesaid  drugs  seized 
or  coming  into  the  possession  of  the  United 
States  in  the  enforcement  of  any  of  the 
above-mentioned  Acts  where  the  owner  or 
owners  thereof  are  unknown.  None  of  the 
aforesaid  drugs  coming  into  possession  of 
the  United  States  under  the  operation  of 
said  Acts,  or  the  provisions  of  this  section,, 
shall  be  destroyed  without  certification  by  a 
committee  appointed  by  the  Commissioner, 
with  the  approval  of  the  Secretary,  that  they 
are  of  no  value  for  medical  or  scientific  pur¬ 
poses. 

Former  Provisions  Repealed. 

Sec.  1009.  That  the  Act  approved  Oc¬ 
tober  22,  1914,  entitled  “An  Act  to  increase 
the  internal  revenue,  and  for  other  pur¬ 
poses,”  and  the  joint  resolution  approved 
December  17,  1915,  entitled  “Joint  resolu¬ 
tion  extending  the  provisions  of  the  Act  en¬ 
titled  ‘An  Act  to  increase  the  internal  reve¬ 
nue,  and  for  other  purposes/  approved  Oc¬ 
tober  twenty-second,  nineteen  hundred  and 
fourteen,  to  December  thirty-first,  nineteen 
hundred  and  sixteen,”  are  hereby  repealed, 
except  that  the  provisions  of  such  Act  shall 
remain  in  force  for  the  assessment  and  col¬ 
lection  of  all  special  taxes  imposed  by  sec¬ 
tions  3  and  4  thereof,  or  by  such  sections  as 
extended  by  such  joint  resolution,  for  any 
year  or  part  thereof  ending  prior  to  January 
1,  1917,  and  of  all  other  taxes  imposed  by 
such  Act,  or  by  such  Act  as  so  extended,  ac¬ 
crued  prior  to  September  8,  1916,  and  for  the 
imposition  and  collection  of  all  penalties  or 
forfeitures  which  have  accrued  or  may  ac¬ 
crue  in  relation  to  any  of  such  taxes. 

TITLE  XI.— STAMP  TAXES 
Instruments  Requiring  Stamps — In  Lieu  of 

Other  Tax. 

Sec.  1100.  That  on  and  after  April  1. 

—148— 


1919,  there  shall  be  levied,  collected,  and 
paid,  for  and  in  respect  of  the  several  bonds, 
debentures,  or  certificates  of  stock  and  of 
indebtedness,  and  other  documents,  instru¬ 
ments,  matters,  and  things  mentioned  and 
described  in  Schedule  A  of  this  title,  or  for 
or  in  respect  of  the  vellum,  parchment,  or 
paper  upon  which  such  instruments,  matters, 
or  things,  or  any  of  them,  are  written  or 
printed,  by  any  person  who  makes,  signs, 
issues,  sells,  removes,  consigns,  or  ships  the 
same,  or  for  whose  use  or  benefit  the  same 
are  made,  signed,  issued,  sold,  removed,  con¬ 
signed,  or  shipped,  the  several  taxes  speci¬ 
fied  in  such  schedule.  The  taxes  imposed 
by  this  section  shall,  in  the  case  of  any  ar¬ 
ticle  upon  which  a  corresponding  stamp  tax 
is  now  imposed  by  law,  be  in  lieu  of  such 
tax. 

Instruments  Exempt  from  Tax. 

Sec.  1101.  That  there  shall  not  be  taxed 
under  this  title  any  bond,  note,  or  other  in¬ 
strument,  issued  by  the  United  States,  or  by 
any  foreign  Government,  or  by  any  State, 
Territory,  or  the  District  of  Columbia,  or  lo¬ 
cal  subdivision  thereof,  or  municipal  or  other 
corporation  exercising  the  taxing  power;  or 
any  bond  of  indemnity  required  to  be  filed 
by  any  person  to  secure  payment  of  any 
pension,  allowance,  allotment,  relief,  or  in¬ 
surance  by  the  United  States;  or  stocks  and 
bonds  issued  by  cooperative  building  and 
loan  associations  which  are  organized  and 
operated  exclusively  for  the  benefit  of  their 
members  and  make  loans  only  to  their 
shareholders,  or  by  mutual  ditch  or  irrigat¬ 
ing  companies. 

Fraudulent  Acts — Penalty. 

Sec.  1102.  That  whoever — 

(a)  Makes,  signs,  issues,  or  accepts,  or 
causes  to  be  made,  signed,  issued,  or  accept¬ 
ed,  any  instrument,  document,  or  paper  of 
any  kind  or  description  whatsoever  without 
the  full  amount  of  tax  thereon  being  duly 
paid ; 

(b)  Consigns  or  ships,  or  causes  to  be 
consigned  or  shipped,  by  parcel  post  any 
parcel,  package,  or  article  without  the  full 
amount  of  tax  being  duly  paid ; 

—149— 


(c)  Manufactures  or  imports  and  sells, 
or  offers  for  sale,  or  causes  to  be  manufac¬ 
tured  or  imported  and  sold,  or  offered  for 
sale,  any  playing  cards,  package,  or  other 
article  without  the  full  amount  of  tax  being 
duly  paid; 

(d)  Makes  use  of  any  adhesive  stamp  to 
denote  any  tax  imposed  by  this  title  with¬ 
out  canceling  or  obliterating  such  stamp  as 
prescribed  in  section  1104; 

Is  guilty  of  a  misdemeanor  and  upon  con¬ 
viction  thereof  shall  pay  a  fine  of  not  more 
than  $100  for  each  offense. 

Sec.  1103.  That  whoever — 

(a)  Fraudulently  cuts,  tears,  or  removes 
from  any  vellum,  parchment,  paper,  instru¬ 
ment,  writing,  package,  or  article,  upon 
which  any  tax  is  imposed  by  this  title,  any 
adhesive  stamp  or  the  impression  of  any 
stamp,  die,  plate,  or  other  article  provided, 
made,  or  used  in  pursuance  of  this  title; 

(b)  Fraudulently  uses,  joins,  fixes,  or 
place  to,  with,  or  upon  any  vellum,  parch¬ 
ment,  paper,  instrument,  writing,  package, 
or  article,  upon  which  any  tax  is  imposed  by 
this  title,  (1)  any  adhesive  stamp,  or  the 
impression  of  any  stamp,  die,  plate,  or  other 
article,  which  has  been  cut,  torn,  or  re¬ 
moved  from  any  other  vellum,  parchment, 
paper,  instrument,  writing,  package,  or  ar¬ 
ticle,  upon  which  any  tax  is  imposed  by  this 
title;  or  (2)  any  adhesive  stamp  or  the  im¬ 
pression  of  any  stamp,  die,  plate,  or  other 
article  of  insufficient  value;  or  (3)  any 
forged  or  counterfeit  stamp,  or  the  impres¬ 
sion  of  any  forged  or  counterfeited  stamp, 
die,  plate,  or  other  article; 

(c)  Willfully  removes,  or  alters  the  can¬ 
cellation,  or  defacing  marks  of,  or  otherwise 
prepares,  any  adhesive  stamp,  with  intent  to 
use,  or  cause  the  same  to  be  used,  after  it 
has  been  already  used,  or  knowingly  or  will¬ 
fully  buys,  sells,  offers  for  sale,  or  gives 
away,  any  such  washed  or  restored  stamp  to 
any  person  for  use,  or  knowingly  uses  the 
same ; 

(d)  Knowingly  and  without  lawful  ex¬ 
cuse  (the  burden  of  proof  of  such  excuse  be¬ 
ing  on  the  accused)  has  in  possession  any 
washed,  restored,  or  altered  stamp,  which 

—150— 


has  been  removed  from  any  vellum,  parch¬ 
ment,  paper,  instrument,  writing,  package, 
or  article ; 

Is  guilty  of  a  misdemeanor,  and  upon 
conviction  shall  be  punished  by  a  fine  of  not 
more  than  $1,000,  or  by  imprisonment  for 
not  more  than  five  years,  or  both,  and  any 
such  re-used,  canceled,  or  counterfeit  stamp 
and  the  vellum,  parchment,  document, 
paper,  package,  or  article  upon  which  it  is 
placed  or  impressed  shall  be  forfeited  to  the 
United  States. 

Method  of  Stamp  Cancellation. 

Sec.  1104.  That  whenever  an  adhesive 
stamp  is  used  for  denoting  any  tax  imposed 
by  this  title,  except  as  hereinafter  provided, 
the  person  using  or  affixing  the  same  shall 
write  or  stamp  or  cause  to  be  written  or 
stamped  thereupon  the  initials  of  his  or  its 
name  and  the  date  upon  which  the  same  is 
attached  or  used,  so  that  the  same  may  not 
again  be  used :  Provided,  That  the  Com¬ 
missioner  may  prescribe  such  other  method 
for  the  cancellation  of  such  stamps  as  he 
may  deem  expedient. 

Preparation  and  Distribution. 

Sec.  1105.  (a)  That  the  Commissioner 
shall  cause  to  be  prepared  and  distributed 
for  the  payment  of  the  taxes  prescribed  in 
this  title  suitable  stamps  denoting  the  tax 
on  the  document,  articles,  or  thing  to  which 
the  same  may  be  affixed,  and  shall  prescribe 
such  method  for  the  affixing  of  said  stamps 
in  substitution  for  or  in  addition  to  the 
method  provided  in  this  title,  as  he  may 
deem  expedient. 

(b)  The  Commissioner,  with  the  ap¬ 
proval  of  the  Secretary,  is  authorized  to 
procure  any  of  the  stamps  provided  for  in 
this  title  by  contract  whenever  such  stamps 
can  not  be  speedily  prepared  by  the  Bureau 
of  Engraving  and  Printing;  but  this  au¬ 
thority  shall  expire  on  January  1,  1920,  ex¬ 
cept  as  to  imprinted  stamps  furnished  under 
contract,  authorized  by  the  Commissioner. 

(c)  All  internal-revenue  laws  relating  to 
the  assessment  and  collection  of  taxes,  are 
hereby  extended  to  and  made  a  part  of  this 

—151— 


title,  so  far  as  applicable,  for  the  purpose  of 
collecting  stamp  taxes  omitted  through  mis¬ 
take  or  fraud  from  any  instrument,  docu¬ 
ment,  paper,  writing,  parcel,  package,  or  ar¬ 
ticle  named  herein. 

Quantity  Furnished  to  Postmaster  General. 

Sec.  1106.  That  the  Commissioner  shall 
furnish  to  the  Postmaster  General  without 
prepayment  a  suitable  quantity  of  adhesive 
stamps  to  be  distributed  to  and  kept  on  sale 
by  the  various  postmasters  in  the  United 
States.  The  Postmaster  General  may  re¬ 
quire  each  such  postmaster  to  give  addi¬ 
tional  or  increased  bond  as  postmaster  for 
the  value  of  the  stamps  so  furnished,  and 
each  such  postmaster  shall  deposit  the  re¬ 
ceipts  from  the  sale  of  such  stamps  to  the 
credit  of  and  render  accounts  to  the  Post¬ 
master  General  at  such  times  and  in  such 
form  as  he  may  by  regulations  prescribe. 
The  Postmaster  General  shall  at  least  once 
monthly  transfer  all  collections  from  this 
source  to  the  Treasury  as  internal-revenue 
collections. 

To  Assistant  Treasurers. 

Sec.  1107.  That  the  collectors  of  the  sev¬ 
eral  districts  shall  furnish  without  prepay¬ 
ment  to  any  assistant  treasurer  or  designa¬ 
ted  depositary  of  the  United  States  located 
in  their  respective  collection  districts  a  suit¬ 
able  quantity  of  adhesive  stamps  for  sale. 
In  such  cases  the  collector  may  require  a 
bond,  with  sufficient  sureties,  to  an  amount 
equal  to  the  value  of  the  adhesive  stamps  so 
furnished,  conditioned  for  the  faithful  re¬ 
turn,  whenever  so  required,  of  all  quantities 
or  amounts  undisposed  of,  and  for  the  pay¬ 
ment  monthly  of  all  quantities  or  amounts 
sold  or  not  remaining  on  hand.  The  Secre¬ 
tary  may  from  time  to  time  make  such  reg¬ 
ulations  as  he  may  find  necessary  to  insure 
the  safekeeping  or  prevent  the  illegal  use  of 
all  such  adhesive  stamps. 

Schedule  A. — Stamp  Taxes. 

Bonds  of  Indebtedness. 

1.  Bonds  of  indebtedness:  On  all  bonds, 
debentures,  or  certificates  of  indebtedness 

—152— 


issued  by  any  person,  and  all  instruments, 
however  termed,  issued  by  any  corporation 
with  interest  coupons  or  in  registered  form, 
known  generally  as  corporate  securities,  on 
each  $100  of  face  value  or  fraction  thereof,  5 
cents :  Provided,  That  every  renewal  of  the 
foregoing  shall  be  taxed  as  a  new  issue: 
Provided  further,  That  when  a  bond  condi¬ 
tioned  for  the  repayment  or  payment  of 
money  is  given  in  a  penal  sum  greater  than 
the  debt  secured,  the  tax  shall  be  based 
upon  the  amount  secured. 

Bonds,  Indemnity  and  Surety. 

2.  Bonds,  indemnity  and  surety :  On  all 
bonds  executed  for  indemnifying  any  person 
who  shall  have  become  bound  or  engaged  as 
surety,  and  on  all  bonds  executed  for  the 
due  execution  or  performance  of  any  con¬ 
tract,  obligation,  or  requirement,  or  the 
duties  of  any  office  or  position,  and  to  ac¬ 
count  for  money  received  by  virtue  thereof, 
and  on  all  policies  of  guaranty  and  fidelity 
insurance,  including  policies  guaranteeing 
titles  to  real  estate  and  mortgage  guarantee 
policies,  and  on  all  other  bonds  of  any  de¬ 
scription,  made,  issued,  or  executed,  not 
otherwise  provided  for  in  this  schedule,  ex¬ 
cept  such  as  may  be  required  in  legal  pro¬ 
ceedings,  50  cents :  Provided,  That  where 
a  premium  is  charged  for  the  issuance,  exe¬ 
cution,  renewal  or  continuance  of  such  bond 
the  tax  shall  be  1  cent  on  each  dollar  or 
fractional  part  thereof  of  the  premium 
charged:  Provided  further,  That  policies  of 
reinsurance  shall  be  exempt  from  the  tax 
imposed  by  this  subdivision. 

Capital  Stock,  Issued. 

3.  Capital  stock,  issued.  On  each  original 
issue,  whether  on  organization  or  reorgan¬ 
ization,  of  certificates  of  stock,  or  of  profits, 
or  of  interest  in  property  or  accumulations, 
by  any  corporation,  on  each  $100  of  face 
value  or  fraction  thereof,  5  cents:  Provided, 
That  where  a  certificate  is  issued  without 
face  value,  the  tax  shall  be  5  cents  per 
share,  unless  the  actual  value  is  in  excess  of 
$100  per  share,  in  which  case  the  tax  shall 
be  5  cents  on  each  $100  of  actual  value  or 
fraction  thereof. 


—153— 


Stamps  Attached  to  Stock  Books. 

The  stamps  representing  the  tax  imposed 
by  this  subdivision  shall  be  attached  to  the 
stock  books  and  not  to  the  certificates  is¬ 
sued. 

Capital  Stock,  Sales  or  Transfers 
— Exceptions. 

4.  Capital  stock,  sales  or  transfers :  On 
all  sales,  or  agreements  to  sell,  or  memor¬ 
anda  of  sales  or  deliveries  of,  or  transfers  of 
legal  title  to  shares  or  certificates  of  stock  or 
of  profits  or  of  interest  in  property  or  accu¬ 
mulations  in  any  corporation,  or  to  rights 
to  subscribe  for  or  to  receive  such  shares  or 
certificates,  whether  made  upon  or  shown 
by  the  books  of  the  corporation,  or  by  any 
assignment  in  blank,  or  by  any  delivery,  or 
by  any  paper  or  agreement  or  memorandum 
or  other  evidence  of  transfer  or  sale,  wheth¬ 
er  entitling  the  holder  in  any  manner  to  the 
benefit  of  such  stock,  interest,  or  rights,  or 
not,  on  each  $100  of  face  value  or  fraction 
thereof,  2  cents,  and  where  such  shares  are 
without  par  or  face  value,  the  tax  shall  be  2 
cents  on  the  transfer  or  sale  or  agreement  to 
sell  on  each  share,  unless  the  actual  value 
thereof  is  in  excess  of  $100  per  share,  in 
which  case  the  tax  shall  be  2  cents  on  each 
$100  of  actual  value  or  fraction  thereof; 
Provided,  That  it  is  not  intended  by  this 
title  to  impose  a  tax  upon  an  agreement 
evidencing  a  deposit  of  certificates  as  col¬ 
lateral  security  for  money  loaned  thereon, 
which  certificates  are  not  actually  sold,  nor 
upon  the  delivery  or  transfer  for  such  pur¬ 
pose  of  certificates  so  deposited :  Provided 
further,  That  the  tax  shall  not  be  imposed 
upon  deliveries  or  transfers  to  a  broker  for 
sale,  nor  upon  deliveries  or  transfers  by  a 
broker  to  a  customer  for  whom  and  upon 
whose  order  he  has  purchased  same,  but 
such  deliveries  or  transfers  shall  be  accom¬ 
panied  by  a  certificate  setting  forth  the 
facts :  Provided  further.  That  in  case  of  sale 
where  the  evidence  of  transfer  is  shown 
only  by  .the  books  of  the  corporation  the 
stamp  shall  be  placed  upon  such  books;  and 
where  the  change  of  ownership  is  by  trans¬ 
fer  of  the  certificate  the  stamp  shall  be 


—154 


placed  upon  the  certificate ;  and  in  cases  of 
an  agreement  to  sell  or  where  the  transfer 
is  by  delivery  of  the  certificate  assigned  in 
blank  there  shall  be  made  and  delivered  by 
the  seller  to  the  buyer  a  bill  or  memorandum 
of  such  sale,  to  which  the  stamp  shall  be 
affixed;  and  every  bill  or  memorandum  of 
sale  or  agreement  to  sell  before  mentioned 
shall  show  the  date  thereof,  the  name  of  the 
seller,  the  amount  of  the  sale,  and  the  mat¬ 
ter  or  thing  to  which  it  refers.  Any  person 
liable  to  pay  the  tax  as  herein  provided,  or 
anyone  who  acts  in  the  matter  as  agent  or 
broker  for  such  person,  who  makes  any  such 
sale,  or  who  in  pursuance  of  any  such  sale 
delivers  any  certificate  or  evidence  of  the 
sale  of  any  stock,  interest  or  right,  or  bill 
or  memorandum  thereof,  as  herein  required, 
without  having  the  proper  stamps  affixed 
thereto  with  intent  to  evade  the  foregoing 
provisions,  shall  be  deemed  guilty  of  a  mis- 
lemeanor,  and  upon  conviction  thereof  shall 
pay  a  fine  of  not  exceeding  $1,000,  or  be  im-  * 
prisoned  not  more  than  six  months,  or  both. 

Produce,  Sales  of,  On  Exchange. 

5.  Produce,  sales  of,  on  exchange :  Upon 
each  sale,  agreement  of  sale,  or  agreement 
to  sell  (not  including  so-called  transferred 
or  scratch  sales),  any  products  or  merchan¬ 
dise  at,  or  under  the  rules  or  usages  of,  any 
exchange,  or  board  of  trade,  or  other  simi¬ 
lar  place,  for  future  delivery,  for  each  $100 
in  value  of  the  merchandise  covered  by  said 
sale  or  agreement  of  sale  or  agreement  to 
sell,  2  cents,  and  for  each  additional  $100  or 
fractional  part  thereof  in  excess  of  $100,  2 
cents :  Provided ,  That  on  every  sale  or 
agreement  of  sale  or  agreement  to  sell  as 
aforesaid  there  shall  be  made  and  delivered 
by  the  seller  to  the  buyer  a  bill,  memoran¬ 
dum,  agreement,  or  other  evidence  of  such 
sale,  agreement  of  sale,  or  agreement  to  sell, 
to  which  there  shall  be  affixed  a  lawful 
stamp  or  stamps  in  value  equal  to  the 
amount  of  the  tax  on  such  sale :  Provided 
further,  That  sellers  of  commodities  de¬ 
scribed  herein,  having  paid  the  tax  provid¬ 
ed  by  this  subdivision,  may  transfer  such 
contracts  to  a  clearing-house  corporation  or 
association,  and  such  transfer  shall  not  be 

—155— 


deemed  to  be  a  sale,  or  agreement  of  sale,  or 
an  agreement  to  sell  within  the  provisions  of 
this  Act,  provided  that  such  transfer  shall 
not  vest  any  beneficial  interest  in  such 
clearing-house  association  but  shall  be  made 
for  the  sole  purpose  of  enabling  such  clear¬ 
ing-house  association  to  adjust  and  balance 
the  accounts  of  the  members  of  such  clear¬ 
ing-house  association  on  their  several  con¬ 
tracts.  Every  such  bill,  memorandum,  or 
other  evidence  of  sale  or  agreement  to  sell 
shall  show  the  date  thereof,  the  name  of  the 
seller,  the  amount  of  the  sale,  and  the  mat¬ 
ter  or  thing  to  which  it  refers ;  and  any  per¬ 
son  liable  to  pay  the  tax  as  herein  provided, 
or  anyone  who  acts  in  the  matter  as  agent 
or  broker  for  such  person,  who  makes  any 
such  sale  or  agreement  of  sale,  or  agreement 
to  sell,  or  who,  in  pursuance  of  any  such 
sale,  agreement  of  sale,  or  agreement  to  sell, 
delivers  any  such  products  or  merchandise 
without  a  bill,  memorandum,  or  other  evi¬ 
dence  thereof  as  herein  required,  or  who  de¬ 
livers  such  bill,  memorandum,  or  other  evi¬ 
dence  of  sale,  or  agreement  to  sell,  without 
having  the  proper  stamps  affixed  thereto, 
with  intent  to  evade  the  foregoing  provi¬ 
sions,  shall  be  deemed  guilty  of  a  misde¬ 
meanor,  and  upon  conviction  thereof  shall 
pay  a  fine  of  not  exceeding  $1,000  or  be  im¬ 
prisoned  not  more  than  six  months,  or  both. 

Cash  Sales. 

No  bill,  memorandum,  agreement,  or 
other  evidence  of  such  sale,  or  agreement  of 
sale,  or  agreement  to  sell,  in  case  of  cash 
sales  of  products  or  merchandise  for  imme¬ 
diate  or  prompt  delivery  which  in  good  faith 
are  actually  intended  to  be  delivered  shall 
be  subject  to  this  tax. 

Drafts  and  Checks. 

6.  Drafts  or  checks  (payable  otherwise 
than  at  sight  or  on  demand)  upon  their  ac¬ 
ceptance  or  delivery  within  the  United 
States  whichever  is  prior,  promissory  notes, 
except  bank  notes  issued  for  circulation, 
and  for  each  renewal  of  the  same,  for  a  sum 
not  exceeding  $100,  2  cents;  and  for  each 
additional  $100  or  fractional  part  thereof,  2 
cents. 


—156— 


When  Not  Applicable  to  Promissory  Notes. 

This  subdivision  shall  not  apply  to  a 
promissory  note  secured  by  the  pledge  of 
bonds  or  obligations  of  the  United  States 
issued  after  April  24,  1917,  or  secured  by 
the  pledge  of  a  promissory  note  which  itself 
is  secured  by  the  pledge  of  such  bonds  or 
obligations:  Provided,  That  in  either  case 
the  par  value  of  such  bonds  or  obligations 
shall  be  not  less  than  the  amount  of  such 
note. 

Conveyances. 

7.  Conveyances:  Deed,  instrument,  or 
writing,  whereby  any  lands,  tenements,  or 
other  realty  sold  shall  be  granted,  assigned, 
transferred,  or  otherwise  conveyed  to,  or 
vested  in,  the  purchaser  or  purchasers,  or 
any  other  person  or  persons,  by  his,  her,  or 
their  direction,  when  the  consideration  or 
value  of  the  interest  or  property  conveyed, 
exclusive  of  the  value  of  any  lien  or  encum¬ 
brance  remaining  thereon  at  the  time  of  sale, 
exceeds  $100  and  does  not  exceed  $500,  50 
cents;  and  for  each  additional  $500  or  frac¬ 
tional  part  thereof,  50  cents.  This  subdivi¬ 
sion  shall  not  apply  to  any  instrument  or 
writing  given  to  secure  a  debt. 

Entry  or  Withdrawal  of  Goods,  at 
Customhouse. 

8.  Entry  of  any  goods,  wares,  or  mer¬ 
chandise  at  any  customhouse,  either  for  con¬ 
sumption  or  warehousing,  not  exceeding 
$100  in  value,  25  cents;  exceeding  $100  and 
not  exceeding  $500  in  value,  50  cents ;  ex¬ 
ceeding  $500  in  value,  $1. 

9.  Entry  for  the  withdrawal  of  any  goods 
or  merchandise  from  customs  bonded  ware¬ 
house,  50  cents. 

Passenger  Tickets. 

10.  Passage  ticket,  one  way  or  round  trip, 
for  each  passenger,  sold  or  issued  in  the 
United  States  for  passage  by  any  vessel  to  a 
port  or  place  not  in  the  United  States,  Can¬ 
ada,  or  Mexico,  if  costing  not  exceeding  $30, 
$1 ;  costing  more  than  $30  and  not  exceeding 
$60,  $3;  costing  more  than  $60,  $5.  This 
subdivision  shall  not  apply  to  passage 
tickets  costing  $10  or  less. 

—157— 


Proxies. 

11.  Proxy  for  voting  at  any  election  for 
officers,  or  meeting  for  the  transaction  of 
business,  of  any  corporation,  except  relig¬ 
ious,  educational,  charitable,  fraternal,  or 
literary  societies,  or  public  cemeteries,  10 
cents. 

Powers  of  Attorney. 

12.  Power  of  attorney  granting  authority 
to  do  or  perform  some  act  for  or  in  behalf 
of  the  grantor,  which  authority  is  not  other¬ 
wise  vested  in  the  grantee,  25  cents.  This 
subdivision  shall  not  apply  to  any  papers 
necessary  to  be  used  for  the  collection  of 
claims  from  the  United  States  or  from  any 
State  for  pensions,  back  pay,  bounty,  or  for 
property  lost  in  the  military  or  naval  serv¬ 
ice,  or  to  powers  of  attorney  required  in 
bankruptcy  cases. 

Playing  Cards. 

13.  Playing  cards :  Upon  every  pack  of 
playing  cards  containing  not  more  than 
fifty-four  cards,  manufactured  or  imported, 
and  sold,  or  removed  for  consumption  or 
sale,  a  tax  of  8  cents  per  pack. 

Parcel-post  Packages. 

14.  Parcel-post  packages :  Upon  every 
parcel  or  package  transported  from  one 
point  in  the  United  States  to  another  by 
parcel  post  on  which  the  postage  amounts 
to  25  cents  or  more,  a  tax  of  1  cent  for  each 
25  cents  or  fractional  part  thereof  charged 
for  such  transportation,  to  be  paid  by  the 
consignor. 

No  such  parcel  or  package  shall  be  trans¬ 
ported  until  a  stamp  or  stamps  representing 
the  tax  due  shall  have  'been  affixed  thereto. 

Insurance  on  Property — Re-insurance. 

15.  On  each  policy  of  insurance,  or  cer¬ 
tificate,  binder,  covering  note,  memorandum, 
cablegram,  letter,  or  other  instrument  by 
whatever  named  called  whereby  insurance 
is  made  or  renewed  upon  property  within 
the  United  States  (including  rents  and  prof¬ 
its)  against  peril  by  sea  or  on  inland  waters 
or  in  transit  on  land  (including  transship- 


158 


ments  and  storage  at  termini  or  way  points) 
or  by  fire,  lightning,  tornado,  wind-storm, 
bombardment,  invasion,  insurrection  or  riot, 
issued  to  or  for  or  in  the  name  of  a  domes¬ 
tic  corporation  or  partnership  or  an  indi¬ 
vidual  resident  of  the  United  States  by  any 
foreign  corporation  or  partnership  or  any 
individual  not  a  resident  of  the  United 
States,  when  such  policy  or  other  instru¬ 
ment  is  not  signed  or  countersigned  by  an 
officer  or  agent  of  the  insurer  in  a  State, 
Territory,  or  district  of  the  United  States 
within  which  such  insurer  is  authorized  to 
do  business,  a  tax  of  3  cents  on  each  dollar, 
or  fractional  part  thereof  of  the  premium 
charged :  Provided,  That  policies  of  re¬ 
insurance  shall  be  exempt  from  the  tax  im¬ 
posed  by  this  subdivision. 

Person  or  Agent  Receiving  Insurance  to 
Affix  Stamps — Penalty. 

Any  person  to  or  for  whom  or  in  whose 
name  any  such  policy  or  other  instrument  is 
issued,  or  any  solicitor  or  broker  acting  for 
or  on  behalf  of  such  person  in  the  procure¬ 
ment  of  any  such  policy  or  other  instrument, 
shall  affix  the  proper  stamps  to  such  policy 
or  other  instrument,  and  for  failure  to  affix 
such  stamps  with  intent  to  evade  the  tax 
shall,  in  addition  to  other  penalties  provided 
therefor,  pay  a  fine  of  double  the  amount  of 
the  tax. 

TITLE  XII.— TAX  ON  EMPLOYMENT 
OF  CHILD  LABOR. 

Regulations  and  Limitations. 

Sec.  1200.  That  every  person  (other  than 
a  bona  fide  boys'  or  girls’  canning  club 
recognized  by  the  Agricultural  Department 
of  a  State  and  of  the  United  States)  oper¬ 
ating  (a)  any  mine  or  quarry  situated  in  the 
United  States  in  which  children  under  the 
age  of  sixteen  years  have  been  employed 
or  permitted  to  work  during  any  portion 
of  the  taxable  year;  or  (b)  any  mill,  can¬ 
nery,  workshop,  factory,  or  manufacturing 
establishment  situated  in  the  United  States 
in  which  children  under  the  age  of  fourteen 
years  have  been  employed  or  permitted  to 
work,  or  children  between  the  ages  of  four¬ 
teen  and  sixteen  have  been  employed  or  per¬ 
mitted  to  work  more  than  eight  hours  in 

—159— 


any  day  or  more  than  six  days  in  any  week, 
or  after  the  hour  of  seven  o’clock  post  merid¬ 
ian,  or  before  the  hour  of  six  o’clock  ante 
meridian,  during  any  portion  of  the  taxable 
year,  shall  pay  for  each  taxable  year,  in  ad¬ 
dition  to  all  other  taxes  imposed  by  law,  an 
excise  tax  equivalent  to  10  per  centum  of  the 
entire  net  profits  received  or  accrued  for 
such  year  from  the  sale  or  disposition  of 
the  product  of  such  mine,  quarry,  mill,  can¬ 
nery,  workshop,  factory,  or  manufacturing 
establishment. 

Method  of  Computation. 

Sec.  1201.  That  in  computing  net  profits 
under  the  provisions  of.  this  title,  for  the 
purpose  of  the  tax  there  shall  be  allowed  as 
deductions  from  the  gross  amount  received 
or  accrued  for  the  taxable  year  from  the  sale 
or  disposition  of  such  products  manufac¬ 
tured  within  the  United  States  the  follow¬ 
ing  items : 

(a)  The  cost  of  raw  materials  entering 
into  the  production  ; 

(b)  Running  expenses,  including  rentals, 
cost  of  repairs,  and  maintenance,  heat, 
power,  insurance,  management,  and  a  rea¬ 
sonable  allowance  for  salaries  or  other  com¬ 
pensations  for  personal  services  actually 
rendered,  and  for  depreciation; 

(c)  Interest  paid  within  the  taxable  year 
on  debts  or  loans  contracted  to  meet  the 
needs  of  the  business,  and  the  proceeds  of 
which  have  been  actually  used  to  meet  such 
needs ; 

(d)  Taxes  of  all  kinds  paid  during  the 
taxable  year  with  respect  to  the  business  or 
property  relating  to  the  production ;  and 

(e)  Losses  actually  sustained  within  the 
taxable  year  in  connection  with  the  busi¬ 
ness  of  producing  such  products,  including 
losses  from  fire,  flood,  storm,  or  other  cas¬ 
ualties,  and  not  compensated  for  by  insur¬ 
ance  or  otherwise. 

Sales  at  Less  Than  Market  Price. 

Sec.  1202.  That  if  any  such  person  dur¬ 
ing  any  taxable  year  or  part  thereof, 
whether  under  any  agreement,  arrange¬ 
ment,  or  understanding  or  otherwise,  sells 
or  disposes  of  any  product  of  such  mine, 
quarry,  mill,  cannery,  workshop,  factory,  or 

—160— 


% 


manufacturing  establishment  at  less  than 
the  fair  market  price  obtainable  therefor 
either  (a)  in  such  manner  as  directly  or  in¬ 
directly  to  benefit  such  person  or  any  per¬ 
son  directly  or  indirectly  interested  in  the 
business  of  such  person;  or  (b)  with  intent 
to  cause  such  benefit;  the  gross  amount  re¬ 
ceived  or  accrued  for  such  year  or  part 
thereof  from  the  sale  or  disposition  of  such 
product  shall  be  taken  to  be  the  amount 
which  would  have  been  received  or  accrued 
from  the  sale  or  disposition  of  such  prod¬ 
uct  if  sold  at  the  fair  market  price. 

Mistake  as  to  Age — Penalty  for  False 
Statement. 

Sec.  1203.  (a)  That  no  person  subject  to 
the  provisions  of  this  title  shall  be  liable  for 
the  tax  herein  imposed  if  the  only  employ¬ 
ment  or  permission  to  work  which  but  for 
this  section  would  subject  him  to  the  tax, 
has  been  of  a  child  as  to  whom  such  person 
has  in  good  faith  procured  at  the  time  of 
employing  such  child  or  permitting  him  to 
work,  and  has  since  in  good  faith  relied 
upon  and  kept  on  file  a  certificate,  issued  in 
such  form,  under  such  conditions  and  by 
such  persons  as  may  be  prescribed  by  a 
board  consisting  of  the  Secretary,  the  Com¬ 
missioner.  and  the  Secretary  of  Labor, 
showing  the  child  to  be  of  such  age  as  not 
to  subject  such  person  to  the  tax  imposed 
by  this  title.  Any  person  who  knowingly 
makes  a  false  statement  or  presents  false 
evidence  in  or  in  relation  to  any  such  cer¬ 
tificate  or  application  therefor  shall  be  pun¬ 
ished  by  a  fine  of  not  less  than  $100,  nor 
more  than  $1,000,  or  by  imprisonment  for 
not  more  than  three  months,  or  bv  both  such 
fine  and  imprisonment,  in  the  discretion  of 
the  court. 

In  any  State  designated  by  such  Board  an 
employment  certificate  or  other  similar 
paper  as  to  the  age  of  the  child,  issued  un¬ 
der  the  laws  of  that  State,  and  not  incon¬ 
sistent  with  the  provisions  of  this  title,  shall 
have  the  same  force  and  effect  as  a  certifi¬ 
cate  herein  provided  for. 

(b)  The  tax  imposed  by  this  title  shall 
not  be  imposed  in  the  case  of  any  person 
who  proves  to  the  satisfaction  of  the  Sec¬ 
retary  that  the  only  employment  or  permis- 

—161— 


sion  to  work  which  but  for  this  section 
would  subject  him  to  the  tax,  has  been  of  a 
child  employed  or  permitted  to  work  under 
a  mistake  of  fact  as  to  the  age  of  such  child, 
and  without  intention  to  evade  the  tax. 

Returns — When  Made. 

Sec.  1204.  That  on  or  before  the  first  day 
of  the  third  month  following  the  close  of 
each  taxable  year,  a  true  and  accurate  re¬ 
turn  under  oath  shall  be  made  by  each 
person  subject  to  the  provisions  of  this 
title  to  the  collector  for  the  district  in  which 
such  person  has  his  principal  office  or  place 
of  business,  in  such  form  as  the  Commis¬ 
sioner,  with  the  approval  of  the  Secretary, 
shall  prescribe,  setting  forth  specifically  the 
gross  amount  of  income  received  or  accrued 
during  such  year  from  the  sale  or  disposi¬ 
tion  of  the  product  of  any  mine,  quarry, 
mill,  cannery,  workshop,  factory,  or  manu¬ 
facturing  establishment,  in  which  children 
have  been  employed  subjecting  him  to  the 
tax  imposed  by  this  title,  and  from  the  total 
thereof  deducting  the  aggregate  items  of 
allowance  authorized  by  this  title,  and  such 
other  particulars  as  to  the  gross  receipts 
and  items  of  allowance  as  the  Commis¬ 
sioner,  with  the  approval  of  the  Secretary, 
may  require. 

Assessment — Notice. 

Sec.  1205.  That  all  such  returns  shall  be 
transmitted  forthwith  by  the  collector  to 
the  Commissioner,  who  shall,  as  soon  as 
practicable,  assess  the  tax  found  due  and 
notify  the  person  making  such  return  of 
the  amount  of  tax  for  which  such  person 
is  liable,  and  such  person  shall  pay  the  tax 
to  the  collector  on  or  before  thirty  days 
from  the  date  of  such  notice. 

Inspection  of  Premises — Penalty  for 
Obstructing. 

Sec.  1206.  That  tor  the  purposes  of  this 
Act  the  Commissioner,  or  any  other  person 
duly  authorized  by  him,  shall  have  au¬ 
thority  to  enter  and  inspect  at  any  time  any 
mine,  quarry,  mill,  cannery,  workshop,  fac¬ 
tory,  or  manufacturing  establishment.  The 
Secretary  of  Labor,  or  any  person  duly  au¬ 
thorized  by  him,  shall,  for  the  purpose  of 

—162— 


complying  with  a  request  of  the  Commis¬ 
sioner  to  make  such  an  inspection,  have  like 
authority,  and  shall  make  report  to  the 
Commissioner  of  inspections  made  under 
such  authority  in  such  form  as  may  be 
prescribed  by  the  Commissioner  with  the 
approval  of  the  Secretary  of  the  Treasury. 

Any  person  who  refuses  or  obstructs  en¬ 
try  or  inspection  authorized  by  this  section 
shall  be  punished  by  a  fine  of  not  more  than 
$1,000,  or  by  imprisonment  for  not  more 
than  one  year,  or  both  such  fine  and  im¬ 
prisonment. 

Taxable  Year  and  First  Taxable  Year 

Defined. 

Sec.  1207.  That  as  used  in  this  title  the 
term  “taxable  year”  shall  have  the  same 
meaning  as  provided  for  the  purposes  of 
income  tax  in  section  200.  The  first  tax¬ 
able  year  for  the  purposes  of  this  title  shall 
be  the  period  between  sixty  days  after  the 
:  passage  of  this  Act  and  December  31,  1919, 
both  inclusive,  or  such  portion  of  such  pe¬ 
riod  as  is  included  within  the  fiscal  year 
(as  defined  in  section  200)  of  the  taxpayer. 

TITLE  XIII.— GENERAL  ADMINIS¬ 
TRATIVE  PROVISIONS. 

Salaries :  Commissioner. 

Sec.  1300.  That  hereafter  the  salary  of 
the  Commissioner  shall  be  $10,000  a  year. 
The  difference  between  the  amount  appro¬ 
priated  under  existing  law  and  the  salary 
herein  established  shall,  for  the  period  be¬ 
tween  the  passage  of  this  Act  and  July  1, 
1919,  be  paid  out  of  the  appropriations  for 
collecting  internal  revenue. 

Assistant  Commissioner 

|  Sec.  1301.  (a)  That  hereafter  there  may 
be  employed  in  the  Bureau  of  Internal  Rev¬ 
enue,  in  lieu  of  the  deputy  commissioners 
whose  salaries  are  now  fixed  by  law,  five 
deputy  commissioners  and  an  assistant  to 
the  Commissioner,  who  shall  each  receive  a 
salary  of  $5,000  a  year,  payable  monthly. 
The  assistant  to  the  Commissioner  may  be 
authorized  by  the  Commissioner  to  perform 
any  duties  which  the  deputy  commissioners 
may  perform  under  existing  law. 

—163— 


Collectors. 

(b)  The  salaries  of  collectors  may  be  re¬ 
adjusted  and  increased  under  such  regula¬ 
tions  as  may  be  prescribed  by  the  Commis¬ 
sioner,  subject  to  the  approval  of  the  Secre¬ 
tary,  but  no  collector  shall  receive  a  salary 
in  excess  of  $6,000  a  year. 

Appropriation  Distribution. 

(c)  There  is  hereby  appropriated,  out  of 
any  money  in  the  Treasury  not  otherwise 
appropriated,  for  the  fiscal  year  ending 
June  30,  1919,  the  sum  of  $7,500,000  for  the 
expenses  of  assessing  and  collecting  the  in¬ 
ternal-revenue  taxes  as  provided  in  this  Act, 
including  the  employment  of  necessary  offi¬ 
cers,  attorneys,  experts,  agents,  inspectors, 
deputy  collectors,  clerks,  janitors,  and  mes¬ 
sengers,  in  the  District  of  Columbia  and  the 
several  collection  districts,  to  be  appointed 
as  provided  by  law,  telegraph  and  telephone 
service,  rental  and  repair  of  quarters,  post¬ 
age,  and  the  purchase  of  such  supplies, 
equipment,  furniture,  mechanical  devices, 
printing,  stationery,  law  books  and  books 
of  reference,  not  to  exceed  $500  for  street 
car  fares  in  the  District  of  Columbia,  and 
such  other  articles  as  may  be  necessary  for 
use  in  the  District  of  Columbia  and  the  sev¬ 
eral  collection  districts:  Provided ,  That 
not  more  than  $2,750,000  of  the  total  amount 
appropriated  by  this  section  may  be  ex¬ 
pended  in  the  Bureau  of  Internal  Revenue, 
in  the  District  of  Columbia. 

Advisory  Tax  Board  Membership — 

V  acancies — Salaries. 

(d)  (1)  There  is  hereby  created  a  Board 
to  be  known  as  the  “Advisory  Tax  Board,” 
hereinafter  called  the  Board,  and  to  be  com¬ 
posed  of  not  to  exceed  six  members  to  be 
appointed  by  the  Commissioner  with  the  ap¬ 
proval  of  the  Secretary.  The  Board  shall 
cease  to  exist  at  the  expiration  of  two  years 
after  the  passage  of  this  Act,  or  at  such 
earlier  time  as  the  Commissioner  with  the 
approval  of  the  Secretary  may  designate. 

Vacancies  in  the  membership  of  the 
Board  shall  be  filled  in  the  same  manner  as 
an  original  appointment.  Any  member 
shall  be  subject  to  removal  by  the  Commis- 

—164— 


sioner  with  the  approval  of  the  Secretary. 
The  Commissioner  with  the  approval  of  the 
Secretary  shall  designate  the  chairman  of 
the  Board.  Each  member  shall  receive  an 
annual  salary  of  $9,000,  payable  monthly,  to¬ 
gether  with  actual  necessary  expenses  when 
absent  from  the  District  of  Columbia  on 
official  business. 

Board  to  Interpret  Tax  Laws. 

(2)  The  Commissioner  may,  and  on  the 
request  of  any  taxpayer  directly  interested 
shall,  submit  to  the  Board  any  question  re¬ 
lating  to  the  interpretation  or  administra¬ 
tion  of  the  income,  war-profits  or  excess- 
profits  tax  laws,  and  the  Board  shall  report 
its  findings  and  recommendations  to  the 
Commissioner. 

Office  in  Washington,  D.  C. 

(3)  The  Board  shall  have  its  office  in  the 
Bureau  of  Internal  Revenue  in  the  District 
of  Columbia.  The  expenses  and  salaries  of 
members  of  the  Board  shall  be  audited,  al¬ 
lowed,  and  paid  out  of  appropriations  for 
collecting  internal  revenue,  in  the  same 
manner  as  expenses  and  salaries  of  em¬ 
ployees  of  the  Bureau  of  Internal  Revenue 
are  audited,  allowed,  and  paid. 

Other  Authorities  of  Board. 

(4)  The  Board  shall  have  the  power  to 
summon  witnesses,  take  testimony,  admin¬ 
ister  oaths,  and  to  require  any  person  to 
produce  books,  papers,  documents,  or  other 
data  relating  to  any  matter  under  investi¬ 
gation  by  the  Board.  Any  member  of  the 
Board  may  sign  subpoenas  and  members 
and  employees  of  the  Bureau  of  Internal 
Revenue  designated  to  assist  the  Board, 
when  authorized  by  the  Board,  may  admin¬ 
ister  oaths,  examine  witnesses,  take  testi¬ 
mony  and  receive  evidence. 

Leave  of  Absence. 

Sec.  1302.  That  all  internal-revenue 
agents  and  inspectors  shall  be  granted  leave 
of  absence  with  pay,  which  shall  not  be 
cumulative,  not  to  exceed  thirty  days  in  any 
calendar  year,  under  such  regulations  as 
the  Commissioner,  with  the  approval  of  the 
Secretary,  may  prescribe. 

—165— 


Legislative  Drafting  Service — Duties. 

Sec.  1303.  (a)  That  there  is  hereby  cre¬ 
ated  a  Legislative  Drafting  Service  under 
the  direction  of  two  draftsmen,  one  of  whom 
shall  be  appointed  by  the  President  of  the 
Senate,  and  one  by  the  Speaker  of  the 
House  of  Representatives,  without  reference 
to  political  affiliations  and  solely  on  the 
ground  of  fitness  to  perform  the  duties  of 
the  office.  Each  draftsman  shall  receive  a 
salary  of  $5,000  a  year,  payable  monthly. 
The  draftsmen  shall,  subject  to  the  approval 
of  the  President  of  the  Senate  and  the 
Speaker  of  the  House  of  Representatives, 
employ  and  fix  the  compensation  of  such 
assistant  draftsmen,  clerks,  and  other  em¬ 
ployees,  and  purchase  such  furniture,  office 
equipment,  books,  stationery,  and  other  sup¬ 
plies,  as  may  be  necessary  for  the  proper 
performance  of  the  duties  of  the  service  and 
as  may  be  appropriated  for  by  Congress. 

(b)  The  Drafting  Service  shall  aid  in 
drafting  public  bills  and  resolutions  or 
amendments  thereto  on  the  request  of  any 
committee  of  either  House  of  Congress,  but 
the  Library  Committee  of  the  Senate  and 
the  Library  Committee  of  the  House  of 
Representatives,  respectively,  may  deter¬ 
mine  the  preference,  if  any,  to  be  given  to 
such  requests  of  the  committees  of  either 
House,  respectively.  The  draftsmen  shall, 
from  time  to  time,  prescribe  rules  and  regu¬ 
lations  for  the  conduct  of  the  work  of  the 
service  for  the  committees  of  each  House, 
subject  to  the  approval  of  the  Library  Com¬ 
mittee  of  each  House,  respectively. 

Appropriation. 

(c)  For  the  remainder  of  the  current  fis¬ 
cal  year  there  is  hereby  appropriated,  out 
of  any  money  in  the  Treasury  not  otherwise 
appropriated,  the  sum  of  $25,000,  or  so  much 
thereof  as  may  be  necessary,  for  the  pur¬ 
pose  of  defraying  the  expenses  of  the  es¬ 
tablishment  and  maintenance  of  the  serv¬ 
ice,  including  the  payment  of  salaries  herein 
authorized.  One-half  of  all  appropriations 
for  the  service  shall  be  disbursed  by  the 
Secretary  of  the  Senate  and  one-half  by  the 
Clerk  of  the  House  of  Representatives. 

—166— 


Imports  from  Virgin  Islands. 

Sec.  1304.  That  there  shall  be  levied,  col¬ 
lected,  and  paid  in  the  United  States,  upon 
articles  coming  into  the  United  States  from 
the  Virgin  Islands,  a  tax  equal  to  the  inter¬ 
nal-revenue  tax  imposed  in  the  United 
States  upon  like  articles  of  domestic  manu¬ 
facture;  such  articles  shipped  from  such 
islands  to  the  United  States  shall  be  ex¬ 
empt  from  the  payment  of  any  tax  imposed 
by  the  internal-revenue  laws  of  such  islands : 
Provided ,  That  there  shall  be  levied,  col¬ 
lected,  and  paid  in  such  islands,  upon  ar¬ 
ticles  imported  from  the  United  States,  a 
tax  equal  to  the  internal-revenue  tax  im¬ 
posed  in  such  islands  upon  like  articles 
there  manufactured ;  and  such  articles  going 
into  such  islands  from  the  United  States 
shall  be  exempt  from  payment  of  any  tax 
imposed  by  the  internal-revenue  laws  of  the 
United  States. 

Administrative  and  Other  Provisions 
Extended  to  This  Act. 

Sec.  1305.  That  all  administrative,  spe¬ 
cial,  or  stamp  provisions  of  law,  including 
the  law  relating  to  the  assessment  cl  taxes, 
so  far  as  applicable,  are  hereby  extended  to 
and  made  a  part  of  this  Act,  and  every 
person  liable  to  any  tax  imposed  by  this 
Act,  or  for  the  collection  thereof,  shall  keep 
such  records  and  render,  under  oath,  such 
statements  and  returns,  and  shall  comply 
with  such  regulations  as  the  Commissioner, 
with  the  approval  of  the  Secretary,  may 
from  time  to  time  prescribe. 

Whenever  in  the  judgment  of  the  Com¬ 
missioner  necessary  he  may  require  any 
person,  by  notice  served  upon  him,  to  make 
a  return  or  such  statements  as  he  deems 
sufficient  to  show  whether  or  not  such  per¬ 
son  is  liable  to  tax. 

Examination  of  Returns. 

The  Commissioner,  for  the  purpose  of  as¬ 
certaining  the  correctness  of  any  return  or 
for  the  purpose  of  making  a  return  where 
none  has  been  made,  is  hereby  authorized, 
by  any  revenue  agent  or  inspector  desig¬ 
nated  by  him  for  that  purpose,  to  examine 

—167— 


any  books,  papers,  records  or  memoranda 
bearing  upon  the  matters  required  to  be  in¬ 
cluded  in  the  return,  and  may  require  the 
attendance  of  the  person  rendering  the  re¬ 
turn  or  of  any  ofificer  or  employee  of  such 
person,  or  the  attendance  of  any  other  per¬ 
son  having  knowledge  in  the  premises,  and 
may  take  his  testimony  with  reference  to 
the  matter  required  by  law  to  be  included 
in  such  return,  with  power  to  administer 
oaths  to  such  person  or  persons. 

Floor  Tax  Requires  Sworn  Returns. 

Sec.  1306.  That  where  floor  taxes  are  im¬ 
posed  by  this  Act  in  respect  to  articles  or 
commodities,  in  respect  to  which  the  tax 
imposed  by  existing  law  has  been  paid,  the 
person  required  by  this  Act  to  pay  the  tax 
shall,  within  thirty  days  after  its  passage, 
make  return  under  oath  in  such  form  and 
under  such  regulations  as  the  Commis¬ 
sioner,  with  the  approval  of  the  Secretary, 
shall  prescribe.  Payment  of  the  tax  shown 
to  be  due  may  be  extended  to  a  date  not 
exceeding  seven  months  from  the  passage 
of  this  Act,  upon  the  filing  of  a  bond  for 
payment  in  such  form  and  amount  and  with 
such  sureties  as  the  Commissioner,  with  the 
approval  of  the  Secretary,  may  prescribe. 

Method  of  Tax  Collection. 

Sec.  1307.  That  in  all  cases  where  the 
method  of  collecting  the  tax  imposed  by 
this  Act  is  not  specifically  provided  in  this 
Act,  the  tax  shall  be  collected  in  such  man¬ 
ner  as  the  Commissioner,  with  the  approval 
of  the  Secretary,  may  prescribe.  All  ad¬ 
ministrative  and  penalty  provisions  of  Title 
XI  of  this  Act,  in  so  far  as  applicable,  shall 
apply  to  the  collection  of  any  tax  which 
the  Commissioner  determines  or  prescribes 
shall  be  paid  by  stamp. 


Evasion — Penalty. 

Sec.  1308.  (a)  That  any  person  required 
under  Titles  V,  VI,  VII,  VIII,  IX,  X,  or 
XII,  to  pay,  or  to  collect,  account  for  and 
pay  over  any  tax,  or  required  by  law  or 
regulations  made  under  authority  thereof  to 

—168— 


make  a  return  or  supply  any  information 
for  the  purposes  of  the  computation,  assess¬ 
ment  or  collection  of  any  such  tax,  who  fails 
to  pay,  collect,  or  truly  account  for  and  pay 
over  any  such  tax,  make  any  such  return 
or  supply  any  such  information  at  the  time 
or  times  required  by  law  or  regulation  shall 
in  addition  to  other  penalties  provided  by 
law  be  subject  to  a  penalty  of  not  more 
than  $1,000. 

(b)  Any  person  who  willfully  refuses  to 
pay,  collect,  or  truly  account  for  and  pay 
over  any  such  tax,  make  such  return  or 
supply  such  information  at  the  time  or 
times  required  by  law  or  regulation,  or  who 
willfully  attempts  in  any  manner  to  evade 
such  tax  shall  be  guilty  of  a  misdemeanor 
and  in  addition  to  other  penalties  provided 
by  law  shall  be  fined  not  more  than  $10,000 
or  imprisoned  for  not  more  than  one  year, 
or  both,  together  with  the  costs  of  prosecu¬ 
tion. 

(c)  Any  person  who  willfully  refuses  to 
pay,  collect,  or  truly  account  for  and  pay 
over  any  such  tax  shall  in  addition  to  other 
penalties  provided  by  law  be  liable  to  a 
penalty  of  the  amount  of  the  tax  evaded,  or 
not  paid,  collected,  or  accounted  for  and 
paid  over,  to  be  assessed  and  collected  in 
the  same  manner  as  taxes  are  assessed  and 
collected :  Provided ,  however ,  That  no 
penalty  shall  be  assessed  under  this  subdi¬ 
vision  for  any  offense  for  which  a  penalty 
may  be  assessed  under  authority  of  section 
3176  of  the  Revised  Statutes,  as  amended,  or 
of  section  605  or  620  of  this  Act,  or  for  any 
offense  for  which  a  penalty  has  been  recov¬ 
ered  under  section  3256  of  the  Revised 
Statutes. 

Person  Defined. 

(d)  The  term  “person”  as  used  in  this 
section  includes  an  officer  or  employee  of 
a  corporation  or  a  member  or  employee  of 
a  partnership,  who  as  such  officer,  em¬ 
ployee,  or  member  is  under  a  duty  to  per¬ 
form  the  act  in  respect  of  which  the  vio¬ 
lation  occurs. 

Rules  and  Regulations  by  Commissioner. 

Sec.  1309.  That  the  Commissioner,  with 
the  approval  of  the  Secretary,  is  hereby  au- 

—169— 


thorized  to  make  all  needful  rules  and  regu¬ 
lations  for  the  enforcement  of  the  provisions 
of  this  Act. 

The  Commissioner  with  such  approval 
may  by  regulation  provide  that  any  return 
required  by  Titles  V,  VI,  VII,  VIII,  IX  or 
X  to  be  under  oath  may,  if  the  amount  of 
the  tax  covered  thereby  is  not  in  excess  of 
$10,  be  signed  or  acknowledged  before  two 
witnesses  instead  of  under  oath. 

Overpayment. 

Sec.  1310.  (a)  That  in  the  case  of  any 
overpayment  or  overcollection  of  any  tax 
imposed  by  section  628  or  630  or  by  Title  V, 
Title  VIII,  or  Title  IX,  the  person  making 
such  overpayment  or  overcollection  may 
take  credit  therefor  against  taxes  due  upon 
any  monthly  return,  and  shall  make  refund 
of  any  excessive  amount  collected  by  him 
upon  proper  application  by  the  person  en¬ 
titled  thereto. 

Credit  Sales — Right  of  Vendor  to  Recover. 

(b)  Wherever  in  this  Act  a  tax  is  re¬ 
quired  to  be  paid  by  the  purchaser  to  the 
vendor  at  the  time  of  a  sale,  and  such  sale 
is  made  on  credit,  then,  under  regulations 
prescribed  by  the  Commissioner,  with  the 
approval  of  the  Secretary,  the  tax  may,  at 
the  option  of  the  vendor,  be  returned  and 
paid  by  him  to  the  United  States  as  if  paid 
to  him  by  the  purchaser  at  the  time  of  the 
sale,  and  in  such  case  the  vendor  shall  have 
a  right  of  action  in  any  court  of  competent 
jurisdiction  against  the  purchaser  for  the 
amount  of  the  tax  so  returned  and  paid  to 
the  United  States. 

Tax  Not  Applicable  to  Exports — Refunds. 

(c)  Under  such  rules  and  regulations  as 
the  Commissioner  with  the  approval  of  the 
Secretary  may  prescribe,  the  taxes  imposed 
under  the  provisions  of  Titles  VI,  VII  or 
IX  shall  not  apply  in  respect  to  articles  sold 
or  leased  for  export  and  in  due  course  so  ex¬ 
ported.  Under  such  rules  and  regulations 
the  amount  of  any  internal-revenue  tax  er¬ 
roneously  or  illegally  collected  in  respect  to 
exported  articles  may  be  refunded  to  the 

—170— 


exporter  of  the  article,  instead  of  to  the 
manufacturer,  if  the  manufacturer  waives 
any  claim  for  the  amount  so  to  be  refunded. 

Increased  Rates  Paid  by  Stamps  on  Hand. 

Sec.  1311.  That  where  the  rate  of  tax  im¬ 
posed  by  this  Act,  payable  by  stamps,  is  an 
increase  over  previously  existing  rates, 
stamps  on  hand  in  the  collectors’  offices  and 
in  the  Bureau  of  Internal  Revenue  may  con¬ 
tinue  to  be  used  until  the  supply  on  hand 
is  exhausted,  but  shall  be  sold  and  ac¬ 
counted  for  at  the  rates  provided  by  this 
Act,  and  assessment  shall  be  made  against 
manufacturers  and  other  taxpayers  having 
such  stamps  on  hand  on  the  day  this  Act 
takes  effect  for  the  difference  between  the 
amount  paid  for  such  stamps  and  the  tax 
due  at  the  rates  provided  by  this  Act. 

Contracts  Made  Prior  to  May  9,  1917. 

Sec.  1312.  (1)  That  (a)  if  any  person 
has  prior  to  May  9,  1917,  made  a  bona  fide 
contract  with  a  dealer  for  the  sale  or  lease, 
after  the  tax  takes  effect,  of  any  article  in 
respect  to  which  a  tax  is  imposed  under 
Title  VI,  VII,  or  IX,  or  under  subdivision 
13  of  Schedule  A  of  Title  XI,  or  under  this 
subdivision,  and  (b)  if  such  contract  does 
not  permit  the  adding  of  the  whole  of  such 
tax  to  the  amount  to  be  paid  under  such 
contract,  then  the  vendee  or  lessee  shall,  in 
lieu  of  the  vendor  or  lessor,  pay  so  much  of 
such  tax  as  is  not  so  permitted  to  be  added 
to  the  contract  price.  If  a  contract  of  the 
character  above  described  was  made  with 
any  person  other  than  a  dealer,  the  tax  col¬ 
lected  under  this  Act  shall  be  the  tax  in 
force  on  May  9,  1917. 

Prior  to  September  3,  1918. 

(2)  If  (a)  any  person  has  prior  to  Sep¬ 
tember  3,  1918,  made  a  bona  fide  contract 
with  a  dealer  for  the  sale  or  lease,  after  the 
tax  takes  effect,  of  any  article  in  respect 
to  which  a  tax  is  imposed  under  Title  VI, 
VII,  or  IX,  or  under  subdivision  13  of 
Schedule  A  of  TitleXI,  or  under  this  subdi¬ 
vision,  and  in  respect  to  which  no  corre¬ 
sponding  tax  was  imposed  by  the  Revenue 
Act  of  1917,  and  (b)  such  contract  does  not 
permit  the  adding,  to  the  amount  to  be  paid 

—171— 


under  such  contract,  of  the  whole  of  the 
tax  imposed  by  this  Act,  then  the  vendee  or 
lessee  shall,  in  lieu  of  the  vendor  or  lessor, 
pay  so  much  of  the  tax  imposed  by  this  Act 
as  is  not  so  permitted  to  be  added  to  the 
contract  price.  If  a  contract  of  the  char¬ 
acter  above  described  was  made  with  any 
person  other  than  a  dealer,  no  tax  shall  be 
collected  under  this  Act. 

(3)  If  (a)  any  person  has  prior  to  Sep¬ 
tember  3,  1918,  made  a  bona  fide  contract 
with  a  dealer  for  the  sale  or  lease,  after  the 
tax  takes  effect,  of  any  article  in  respect  to 
which  a  tax  is  imposed  under  Title  VI,  VII, 
or  IX,  or  under  subdivision  13  of  Schedule 
A  of  Title  XI,  or  under  this  subdivision,  and 
in  respect  to  which  a  corresponding  tax  was 
imposed  by  the  Revenue  Act  of  1917,  and 
(b)  such  contract  does  not  permit  the  add¬ 
ing,  to  the  amount  to  be  paid  under  such 
contract,  of  the  whole  of  the  difference  be¬ 
tween  such  tax  and  the  corresponding  tax 
imposed  by  the  Revenue  Act  of  1917,  then 
the  vendee  or  lessee  shall,  in  lieu  of  the 
vendor  or  lessor,  pay  so  much  of  such  differ¬ 
ence  as  is  not  so  permitted  to  be  added  to 
the  contract  price.  If  a  contract  of  the 
character  above  described  was  made  with 
any  person  other  than  a  dealer,  the  tax 
collected  under  this  Act  shall  be  the  tax 
in  force  on  September  3,  1918. 

Taxes  to  Vendor. 

(4)  The  taxes  payable  by  the  vendee  or 
lessee  under  this  section  shall  be  paid  to 
the  vendor  or  lessor  at  the  time  the  sale 
or  lease  is  consummated,  and  collected,  re¬ 
turned,  and  paid  to  the  United  States  by 
such  vendor  or  lessor  in  the  same  manner 
as  provided  in  section  502. 

Dealer  Defined. 

(5)  The  term  “dealer”  as  used  in  this  sec¬ 
tion  includes  a  vendee  who  purchases  any 
article  with  intent  to  use  it  in  the  manu¬ 
facture  or  production  of  another  article  in¬ 
tended  for  sale. 

(6)  This  section  shall  not  apply  to  any 
tax  imposed  by  section  906. 

Fraction  of  Cent. 

Sec.  1313.  That  in  the  payment  of  any 
tax  under  this  Act  not  payable  by  stamp  a 

—172— 


fractional  part  of  a  cent  shall  be  disregarded 
unless  it  amounts  to  one-half  cent  or  more, 
in  which  case  it  shall  be  increased  to  1  cent. 

United  States  Certificates  of  Indebtedness 
— Checks — Accepted  at  Par. 

Sec.  1314.  That  collectors  may  receive,  at 
par  with  an  adjustment  for  accrued  interest, 
certificates  of  indebtedness  issued  by  the 
United  States  and  uncertified  checks  in  pay¬ 
ment  of  income,  war-profits  and  excess- 
profits  taxes  and  any  other  taxes  payable 
other  than  by  stamp,  during  such  time  and 
under  such  regulations  as  the  Commis¬ 
sioner,  with  the  approval  of  the  Secretary, 
shall  prescribe;  but  if  a  check  so  received  is 
not  paid  by  the  bank  on  which  it  is  drawn 
the  person  by  whom  such  check  has  been 
tendered  shall  remain  liable  for  the  payment 
of  the  tax  and  for  all  legal  penalties  and 
additions  the  same  as  if  such  check  had  not 
been  tendered. 

Stamps  Issued  for  Restamping  Packages. 

Sec.  1315.  That  section  3315  of  the  Re¬ 
vised  Statutes,  as  amended,  is  hereby 
amended  to  read  as  follows: 

“Sec.  3315.  The  Commissioner  of  Inter¬ 
nal  Revenue  may,  under  regulations  pre¬ 
scribed  by  him  with  the  approval  of  the 
Secretary  of  the  Treasury,  issue  stamps  for 
restamping  packages  of  distilled  spirits,  to¬ 
bacco,  cigars,  snuff,  cigarettes,  fermented 
liquors,  and  wines  which  have  been  duly 
stamped  but  from  which  the  stamps  have 
been  lost  or  destroved  by  unavoidable  ac¬ 
cident.” 

Refunds. 

Sec.  1316.  (a)  That  section  3220  of  the 
Revised  Statutes  is  hereby  amended  to  read 
as  follows: 

“Sec.  3220.  The  Commissioner  of  Inter¬ 
nal  Revenue,  subject  to  regulations  pre¬ 
scribed  by  the  Secretary  of  the  Treasury,  is 
authorized  to  remit,  refund,  and  pay  back 
all  taxes  erroneously  or  illegally  assessed 
or  collected,  all  penalties  collected  without 
authority,  and  all  taxes  that  appear  to  be  un¬ 
justly  assessed  or  excessive  in  amount,  or 
in  any  manner  wrongfully  collected;  also 
to  repay  to  any  collector  or  deputy  collector 

—173— 


the  full  amount  of  such  sums  of  money 
as  may  be  recovered  against  him  in  any 
court,  for  any  internal  revenue  taxes  col¬ 
lected  by  him,  with  the  cost  and  expenses 
of  suit;  also  all  damages  and  costs  recov¬ 
ered  against  any  assessor,  assistant  assessor, 
collector,  deputy  collector,  agent,  or  in¬ 
spector,  in  any  suit  brought  against  him 
by  reason  of  anything  done  in  the  due  per¬ 
formance  of  his  official  duty,  and  shall  make 
report  to  Congress  at  the  beginning  of  each 
regular  session  of  Congress  of  all  transac¬ 
tions  under  this  section.” 

(b)  Section  3225  of  the  Revised  Statutes 
of  the  United  States  is  hereby  amended  to 
read  as  follows : 

No  Refund  on  Second  Assessment — 
Exception. 

“Sec.  3225.  When  a  second  assessment  is 
made  in  case  of  any  list,  statement,  or  re¬ 
turn,  which  in  the  opinion  of  the  collector 
or  deputy  collector  was  false  or  fraudulent, 
or  contained  any  understatement  or  under¬ 
valuation,  such  assessment  shall  not  be  re¬ 
mitted,  nor  shall  taxes  collected  under  such 
assessment  be  refunded,  or  paid  back,  or  re¬ 
covered  by  any  suit,  unless  it  is  proved  that 
such  list,  statement,  or  return  was  not  will¬ 
fully  false  or  fraudulent  and  did  not  con¬ 
tain  any  willful  understatement  or  under¬ 
valuation.” 

Sections  Amended. 

(c)  That  the  paragraph  of  section  3689 
of  the  Revised  Statutes,  as  amended,  read¬ 
ing  as  follows : 

“Refunding  taxes  illegally  collected  (in¬ 
ternal  revenue)  :  To  refund  and  pay  back 
duties  erroneously  or  illegally  assessed  or 
collected  under  the  internal-revenue  laws,” 
is  repealed  from  and  after  June  30,  1920; 
and  the  Secretary  of  the  Treasury  shall  sub¬ 
mit  for  the  fiscal  year  1921,  and  annually 
thereafter,  an  estimate  of  appropriations  to 
refund  and  pay  back  duties  or  taxes  erron¬ 
eously  or  illegally  assessed  or  collected  un¬ 
der  the  internal-revenue  laws,  and  to  pav 
judgments,  including  interest  and  costs, 
rendered  for  taxes  or  penalties  erroneously 


—174 


or  illegally  assessed  or  collected  under  the 
internal-revenue  laws. 

Collectors  to  Report  Violations. 

Sec.  1317.  That  sections  3164,  3165,  3167, 
3172,  3173,  and  3176  of  the  Revised  Statutes 
as  amended  are  hereby  amended  to  read 
as  follows: 

“Sec.  3164.  It  shall  be  the  duty  of  every 
collector  of  internal  revenue  having  knowl¬ 
edge  of  any  willful  violation  of  any  law  of 
the  United  States  relating  to  the  revenue, 
within  thirty  days  after  coming  into  pos¬ 
session  of  such  knowledge,  to  file  with  the 
district  attorney  of  the  district  in  which 
any  fine,  penalty,  or  forfeiture  may  be  in¬ 
curred,  a  statement  of  all  the  facts  and  cir¬ 
cumstances  of  the  case  within  his  knowl¬ 
edge,  together  with  the  names  of  the  wit¬ 
nesses,  setting  forth  the  provisions  of  law 
believed  to  be  so  violated  on  which  reliance 
may  be  had  for  condemnation  or  conviction. 

Administer  Oaths. 

“Sec.  3165.  Every  collector,  deputy  col¬ 
lector,  internal-revenue  agent,  and  internal- 
revenue  officer  assigned  to  duty  under  an 
internal-revenue  agent,  is  authorized  to  ad¬ 
minister  oaths  and  to  take  evidence  touch¬ 
ing  any  part  of  the  administration  of  the 
internal-revenue  laws  with  which  he  is 
charged,  or  where  such  oaths  and  evidence 
are  authorized  by  law  or  regulation  au¬ 
thorized  by  law  to  be  taken. 

Unlawful  to  Divulge  Information — Penalty. 

“Sec.  3167.  It  shall  be  unlawful  for  any 
collector,  deputy  collector,  agent,  clerk,  or 
other  officer  or  employee  of  the  United 
States  to  divulge  or  to  make  known  in  any 
manner  whatever  not  provided  by  law  to 
any  person  the  operations,  style  of  work,  or 
apparatus  of  any  manufacturer  or  producer 
visited  by  him  in  the  discharge  of  his  official 
duties,  or  the  amount  or  source  of  income, 
profits,  losses,  expenditures,  or  any  partic¬ 
ular  thereof,  set  forth  or  disclosed  in  any 
income  return,  or  to  permit  any  income  re¬ 
turn  or  copy  thereof  or  any  book  contain¬ 
ing  any  abstract  or  particulars  thereof 

—175— 


to  be  seen  or  examined  by  any  person 
except  as  provided  by  law ;  and  it  shall 
be  unlawful  for  any  person  to  print  or  pub¬ 
lish  in  any  manner  whatever  not  provided 
by  law  any  income  return,  or  any  part  there¬ 
of  or  source  of  income,  profits,  losses,  or 
expenditures  appearing  in  any  income  re¬ 
turn  ;  and  any  offense  against  the  foregoing 
provision  shall  be  a  misdemeanor  and  be 
punished  by  a  fine  not  exceeding  $1,000  or 
by  imprisonment  not  exceeding  one  year,  or 
both,  at  the  discretion  of  the  court;  and  if 
the  offender  be  an  officer  or  employee  of 
the  United  States  he  shall  be  dismissed  from 
office  or  discharged  from  employment. 

All  Persons  Subject  to  Tax,  Listed. 

“Sec.  3172.  Every  collector  shall,  from 
time  to  time,  cause  his  deputies  to  proceed 
through  every  part  of  his  district  and  in¬ 
quire  after  and  concerning  all  persons  there¬ 
in  who  are  liable  to  pay  any  internal-rev¬ 
enue  tax,  and  all  persons  owning  or  having 
the  care  and  management  of  any  objects 
liable  to  pay  any  tax,  and  to  make  a  list 
of  such  persons  and  enumerate  said  objects. 

Returns — Particulars — Penalty. 

“Sec.  3173.  It  shall  be  the  duty  of  any  per¬ 
son,  partnership,  firm,  association,  or  cor¬ 
poration,  made  liable  to  any  duty,  special 
tax,  or  other  tax  imposed  by  law,  when  not 
otherwise  provided  for,  (1)  in  case  of  a  spe¬ 
cial  tax,  on  or  before  the  thirty-first  day  of 
July  in  each  year,  and  (2)  in  other  cases 
before  the  day  on  which  the  taxes  accrue, 
to  make  a  list  or  return,  verified  by  oath,  to 
the  collector  or  a  deputy  collector  of  the  dis¬ 
trict  where  located,  of  the  articles  or  ob¬ 
jects,  including  the  quantity  of  goods, 
wares,  and  merchandise,  made  or  sold  and 
charged  with  a  tax,  the  several  rates  and 
aggregate  amount,  according  to  the  forms 
and  regulations  to  be  prescribed  by  the 
Commissioner  of  Internal  Revenue,  with 
the  approval  of  the  Secretary  of  the  Treas¬ 
ury,  for  which  such  person,  partnership, 
firm,  association,  or  corporation  is  liable : 
Provided,  That  if  any  person  liable  to  pay 
any  duty  or  tax,  or  owning,  possessing,  or 
having  the  care  or  management  of  property, 
goods,  wares,  and  merchandise,  article  or 

—176— 


objects  liable  to  pay  any  duty,  tax,  or  li¬ 
cense,  shall  fail  to  make  and  exhibit  a  list 
or  return  required  by  law,  but  shall  consent 
to  disclose  the  particulars  of  any  and  all 
the  property,  goods,  wares,  and  merchan¬ 
dise,  articles,  and  objects  liable  to  pay  any 
duty  or  tax,  or  any  business  or  occupation 
liable  to  pay  any  tax  as  aforesaid,  then,  and 
in  that  case,  it  shall  be  the  duty  of  the  col¬ 
lector  or  deputy  collector  to  make  such  list 
or  return,  which,  being  distinctly  read,  con¬ 
sented  to,  and  signed  and  verified  by  oath 
by  the  person  so  owning,  possessing,  or  hav¬ 
ing  the  care  and  management  as  aforesaid, 
may  be  received  as  the  list  of  such  person : 
Provided  further,  That  in  case  no  annual  list 
or  return  has  been  rendered  by  such  per¬ 
son  to  the  collector  or  deputy  collector  as 
required  by  law,  and  the  person  shall  be 
absent  from  his  or  her  residence  or  place 
of  business  at  the  time  the  collector  or  a 
deputy  collector  shall  call  for  the  an¬ 
nual  list  or  return,  it  shall  be  the  duty 
of  such  collector  or  deputy  collector  to 
leave  at  such  place  of  residence  or  business, 
with  some  one  of  suitable  age  and  discre¬ 
tion,  if  such  be  present,  otherwise  to  deposit 
in  the  nearest  post  office,  a  note  or  memo¬ 
randum  addressed  to  such  person,  requiring 
him  or  her  to  render  to  such  collector  or 
deputy  collector  the  list  or  return  required 
by  law  within  ten  days  from  the  date  of 
such  note  or  memorandum,  verified  by  oath. 
And  if  any  person,  on  being  notified  or  re¬ 
quired  as  aforesaid,  shall  refuse  or  neglect 
to  render  such  list  or  return  within  the  time 
required  as  aforesaid,  or  whenever  any  per¬ 
son  who  is  required  to  deliver  a  monthly  or 
other  return  of  objects  subject  to  tax  fails 
to  do  so  at  the  time  required,  or  delivers 
any  return  which,  in  the  opinion  of  the  col¬ 
lector,  is  erroneous,  false,  or  fraudulent,  or 
contains  any  undervaluation  or  understate¬ 
ment,  or  refuses  to  allow  any  regularly  au¬ 
thorized  Government  officer  to  examine  the 
books  of  such  person,  firm,  or  corporation, 
it  shall  be  lawful  for  the  collector  to  sum¬ 
mon  such  person,  or  any  other  person  hav¬ 
ing  possession,  custody,  or  care  of  books 
of  account  containing  entries  relating  to  the 
business  of  such  person  or  any  other  person 
he  may  deem  proper,  to  appear  before  him 

—177— 


and  produce  such  books  at  a  time  and  place 
named  in  the  summons,  and  to  give  testi¬ 
mony  or  answer  interrogatories,  under  oath, 
respecting  any  objects  or  income  liable  to 
tax  or  the  returns  thereof.  The  collector 
may  summon  any  person  residing  or  found 
within  the  State  or  Territory  in  which  his 
district  lies ;  and  when  the  person  intended 
to  be  summoned  does  not  reside  and  can  not 
be  found  within  such  State  or  Territory, 
he  may  enter  any  collection  district  where 
such  person  may  be  found  and  there  make 
the  examination  herein  authorized.  And 
to  this  end  he  may  there  exercise  all  the 
authority  which  he  might  lawfully  exercise 
in  the  district  for  which  he  was  commis¬ 
sioned  :  Provided,  That  ‘person/  as  used 
in  this  section,  shall  be  construed  to  include 
any  corporation,  joint-stock  company  or  as¬ 
sociation,  or  insurance  company  when  such 
construction  is  necessary  to  carry  out  its 
provisions. 

Failure  to  File. 

“Sec.  3176.  If  any  person,  corporation, 
company,  or  association  fails  to  make  and 
file  a  return  or  list  at  the  time  prescribed 
by  law  or  by  regulation  made  under  au¬ 
thority  of  law,  or  makes,  willfully  or  other¬ 
wise,  a  false  or  fraudulent  return  or  list,  the 
collector  or  deputy  collector  shall  make  the 
return  or  list  from  his  own  knowledge  and 
from  such  information  as  he  can  obtain 
through  testimony  or  otherwise.  In  any 
such  case  the  Commissioner  may,  from  his 
own  knowledge  and  from  such  information 
as  he  can  obtain  through  testimony  or 
otherwise,  make  a  return  or  amend  any  re¬ 
turn  made  by  a  collector  or  deputy  col¬ 
lector.  Any  return  or  list  so  made  and  sub¬ 
scribed  by  the  Commissioner,  or  by  a  col¬ 
lector  or  deputy  collector  and  approved  by 
the  Commissioner,  shall  be  prima  facie  good 
and  sufficient  for  all  legal  purposes. 

“If  the  failure  to  file  a  return  or  list  is  due 
to  sickness  or  absence,  the  collector  may  al¬ 
low  such  further  time,  not  exceeding  thirty 
days,  for  making  and  filing  the  return  or 
list  as  he  deems  proper. 

Procedure — Additional  Tax. 

“The  Commissioner  of  Internal  Revenue 
shall  determine  and  assess  all  taxes,  other 

—178— 


than  stamp  taxes,  as  to  which  returns  or 
lists  are  so  made  under  the  provisions  of 
this  section.  In  case  of  any  failure  to  make 
and  file  a  return  or  list  within  the  time 
prescribed  by  law,  or  prescribed  by  the 
Commissioner  of  Internal  Revenue  or  the 
collector  in  pursuance  of  law,  the  Commis¬ 
sioner  of  Internal  Revenue  shall  add  to  the 
tax  25  per  centum  of  its  amount,  except  that 
when  a  return  is  filed  after  such  time  and  it 
is  shown  that  the  failure  to  file  it  was  due 
to  a  reasonable  cause  and  not  to  willful  neg¬ 
lect,  no  such  addition  shall  be  made  to  the 
tax.  In  case  a  false  or  fraudulent  return  or 
list  is  willfully  made,  the  Commissioner  of 
Internal  Revenue  shall  add  to  the  tax  50 
per  centum  of  its  amount. 

“The  amount  so  added  to  any  tax  shall  be 
collected  at  the  same  time  and  in  the  same 
manner  and  as  part  of  the  tax  unless  the 
tax  has  been  paid  before  the  discovery  of 
the  neglect,  falsity,  or  fraud,  in  which  case 
the  amount  so  added  shall  be  collected  in 
the  same  manner  as  the  tax.” 

Jurisdiction  of  District  Courts. 

Sec.  1318.  That  if  any  person  is  sum¬ 
moned  under  this  Act  to  appear,  to  testify, 
or  to  produce  books,  papers  or  other  data, 
the  district  court  of  the  United  States  for 
the  district  in  which  such  person  resides 
shall  have  jurisdiction  by  appropriate  proc¬ 
ess  to  compel  such  attendance,  testimony, 
or  production  of  books,  papers,  or  other 
data. 

The  district  courts  of  the  United  States 
at  the  instance  of  the  United  States  are 
hereby  invested  with  such  jurisdiction  to 
make  and  issue,  both  in  actions  at  law  and 
suits  in  equity,  writs  and  orders  of  injunc¬ 
tion,  and  of  ne  exeat  republica,  orders  ap¬ 
pointing  receivers,  and  such  other  orders 
and  process,  and  to  render  such  judgments 
and  decrees,  granting  in  proper  cases  both 
legal  and  equitable  relief  together,  as  may 
be  necessary  or  appropriate  for  the  enforce¬ 
ment  of  the  provisions  of  this  Act.  The 
remedies  hereby  provided  are  in  addition  to 
and  not  exclusive  of  any  and  all  other 
remedies  of  the  United  States  in  such  courts 
or  otherwise  to  enforce  such  provisions. 

—179— 


False  Statement,  at  Time  of  Sale,  as  to  Tax 

Paid — Penalty. 

Sec.  1319.  That  whoever  in  connection 
with  the  sale  or  lease,  or  offer  for  sale  or 
lease,  of  any  article,  or  for  the  purpose  of 
making  such  sale  or  lease,  makes  any  state¬ 
ment,  written  or  oral,  (1)  intended  or  cal¬ 
culated  to  lead  any  person  to  believe  that 
any  part  of  the  price  at  which  such  article 
is  sold  or  leased,  or  offered  for  sale  or  lease, 
consists  of  a  tax  imposed  under  the  author¬ 
ity  of  the  United  States,  or  (2)  ascribing  a 
particular  part  of  such  price  to  a  tax  im¬ 
posed  under  the  authority  of  the  United 
States,  knowing  that  such  statement  is  false 
or  that  the  tax  is  not  so  great  as  the  portion 
of  such  price  ascribed  to  such  tax,  shall  be 
guilty  of  a  misdemeanor  and  upon  convic¬ 
tion  thereof  shall  be  punished  by  a  fine  of 
not  more  than  $1,000  or  by  imprisonment 
not  exceeding  one  year,  or  both. 

Penal  Bonds — U.  S.  Bonds  as  Security  at 
Par — Return  of  Bonds — Limitations. 

Sec.  1320.  That  wherever  by  the  laws  of 
the  United  States  or  regulations  made  pur¬ 
suant  thereto,  any  person  is  required  to  fur¬ 
nish  any  recognizance,  stipulation,  bond, 
guaranty,  or  undertaking,  hereinafter  called, 
“penal  bond,”  with  surety  or  sureties,  such 
person  may,  in  lieu  of  such  surety  or  sure¬ 
ties,  deposit  as  security  with  the  official  hav¬ 
ing  authority  to  approve  such  penal  bond, 
United  States  Liberty  bonds  or  other 
bonds  of  the  United  States  in  a  sum 
equal  at  their  par  value  to  the  amount  of 
such  penal  bond  required  to  be  furnished, 
together  with  an  agreement  authorizing 
such  official  to  collect  or  sell  such  bonds 
so  deposited  in  case  of  any  default  in  the 
performance  of  any  of  the  conditions  or 
stipulations  of  such  penal  bond.  The  ac¬ 
ceptance  of  such  United  States  bonds  in  lieu 
of  surety  or  sureties  required  by  law  shall 
have  the  same  force  and  effect  as  individ¬ 
ual  or  corporate  sureties,  or  certified  checks, 
bank  drafts,  post-office  money  orders,  or 
cash,  for  the  penalty  or  amount  of  such 
penal  bond.  The  bonds  deposited  hereun¬ 
der,  and  such  other  United  States  bonds  as 


—180— 


may  be  substituted  therefor  from  time  to 
time  as  such  security,  may  be  deposited 
with  the  Treasurer,  or  an  Assistant  Treas¬ 
urer  of  the  United  States,  a  Government  de¬ 
pository,  Federal  Reserve  bank,  or  member 
bank,  which  shall  issue  receipt  therefor, 
describing  such  bonds  so  deposited.  As 
soon  as  security  for  the  performance  of  such 
penal  bond  is  no  longer  necessary,  such 
bonds  so  deposited,  shall  be  returned  to  the 
depositor:  Provided ,  That  in  case  a  per¬ 
son  or  persons  supplying  a  contractor  with 
labor  or  material  as  provided  by  the  Act 
of  Congress,  approved  February  24,  1905 
(33  Stat.,  811),  entitled  “An  Act  to  amend 
an  Act  approved  August  thirteenth,  eigh¬ 
teen  hundred  and  ninety-four,  entitled 
‘An  Act  for  the  protection  of  persons 
furnishing  materials  and  labor  for  the 
construction  of  public  works,’  ”  shall  file 
with  the  obligee,  at  any  time  after  a  default 
in  the  performance  of  any  contract  subject 
to  said  Acts,  the  application  and  affi¬ 
davit  therein  provided,  the  obligee  shall  not 
deliver  to  the  obligor  the  deposited  bonds 
nor  any  surplus  proceeds  thereof  until  the 
expiration  of  the  time  limited  by  said  Acts 
for  the  institution  of  suit  by  such  per¬ 
son  or  persons,  and,  in  case  suit  shall 
be  instituted  within  such  time,  shall  hold 
said  bonds  or  proceeds  subject  to  the  order 
of  the  court  having  jurisdiction  thereof :  Pro¬ 
vided  further,  That  nothing  herein  con¬ 
tained  shall  affect  or  impair  the  priority  of 
the  claim  of  the  United  States  against  the 
bonds  deposited  or  any  right  or  remedy 
granted  by  said  Acts  or  by  this  section  to 
the  United  States  for  default  upon  any  ob¬ 
ligation  of  said  penal  bond :  Provided  fur¬ 
ther,  That  all  laws  inconsistent  with  this  sec¬ 
tion  are  hereby  so  modified  as  to  conform 
to  the  provisions  hereof:  And  provided 
further,  That  nothing  contained  herein  shall 
affect  the  authority  of  courts  over  the  se¬ 
curity,  where  such  bonds  are  taken  as  se¬ 
curity  in  judicial  proceedings,  or  the  au¬ 
thority  of  any  administrative  officer  of  the 
United  States  to  receive  United  States 
bonds  for  security  in  cases  authorized  by 
existing  laws.  The  Secretary  may  pre¬ 
scribe  rules  and  regulations  necessary  and 
proper  for  carrying  this  section  into  effect. 

—181— 


TITLE  XIV.— GENERAL  PROVISIONS. 

Parts  of  Acts  Repealed. 

Sec.  L400.  (a)  That  the  following  parts 
of  Acts  are  hereby  repealed,  subject  to  the 
limitations  provided  in  subdivision  (b)  : 

(1)  The  following  titles  of  the  Revenue 
Act  of  1916: 

Title  I  (called  “Income  Tax”)  ; 

Title  II  (called  “Estate  Tax”) ; 

Title  III  (called  “Munitions  Manufac¬ 
turers’  Tax”),  as  amended; 

Title  IV  (called  “Miscellaneous  Taxes”). 

(2)  The  following  parts  of  the  Act  en¬ 
titled  “An  Act  to  provide  increased  revenue 
to  defray  the  expenses  of  the  increased  ap¬ 
propriations  for  the  Army  and  Navy  and  the 
extensions  of  fortifications,  and  for  other 
purposes,”  approved  March  3,  1917 : 

Title  III  (called  “Estate  Tax”) ; 

Section  402  (called  “Returns  of  Divi¬ 
dends”). 

(3)  The  following  titles  of  the  Revenue 
Act  of  1917: 

Title  I  (called  “War  Income  Tax”) ; 

Title  II  (called  “War  Excess-Profits 
Tax”)  ; 

Title  III  (called  “War  Tax  on  Bever- 
ages”) ; 

Title  IV  (called  “War  Tax  on  Cigars,  To- 
bacqo,  and  Manufactures  Thereof”)  ; 

Title  V  (called  “War  Tax  on  Facilities 
Furnished  by  Public  Utilities,  and  Insur¬ 
ance”)  ; 

Title  VI  (called  “War  Excise  Taxes”)  ; 

Title  VII  (called  “War  Tax  on  Admis¬ 
sions  and  Dues”) ; 

Title  VIII  (called  “War  Stamp  Taxes”)  ; 

Title  IX  (called  “War  Estate  Tax”)  ; 

Title  X  (called  “Administrative  Provi¬ 
sions”)  ; 

Title  XII  (called  “Income-Tax  Amend¬ 
ments”). 

Acts  Conditionally  Remain  in  Force. 

(b)  Such  parts  of  Acts  shall  remain  in 
force  for  the  assessment  and  collection  of  all 
taxes  which  have  accrued  thereunder,  and 
for  the  imposition  and  collection  of  all  pen¬ 
alties  or  forfeitures  which  have  accrued  and 
may  accrue  in  relation  to  any  such  taxes, 


and  except  that  the  unexpended  balance  of 
any  appropriation  heretofore  made  and  now 
available  for  the  administration  of  any 
such  part  of  an  Act  shall  be  available  for  the 
administration  of  this  Act  or  the  corre¬ 
sponding  provision  thereof :  Provided,  That, 
except  as  otherwise  provided  in  this  Act,  no 
taxes  shall  be  collected  under  Title  I  of  the 
Revenue  Act  of  1916  as  amended  by  the 
Revenue  Act  of  1917,  or  Title  I  or  II  of  the 
Revenue  Act  of  1917,  in  respect  to  any 
period  after  December  31,  1917:  Provided 
further,  That  the  assessment  and  collection 
of  all  estate  taxes,  and  the  imposition  and 
collection  of  all  penalties  or  forfeitures,, 
which  have  accrued  under  Title  II  of  the 
Revenue  Act  of  1916  as  amended  by  the  Act 
entitled  “An  Act  to  provide  increased  rev¬ 
enue  to  defray  the  expenses  of  the  increased 
appropriations  for  the  Army  and  Navy  and 
the  extensions  of  fortifications,  and  for  other 
purposes,”  approved  March  3,  1917,  or  Title 
IX  of  the  Revenue  Act  of  1917,  shall  be  ac¬ 
cording  to  the  provisions  of  Title  IV  of  this 
Act.  In  the  case  of  any  tax  imposed  by  any 
part  of  an  Act  herein  repealed,  if  there  is  a 
tax  imposed  by  this  Act  in  lieu  thereof,  the 
provision  imposing  such  tax  shall  remain 
in  force  until  the  corresponding  tax  under 
this  Act  takes  effect  under  the  provisions  of 
this  Act. 

Porto  Rico  and  Philippines. 

Title  I  of  the  Revenue  Act  of  1916  as 
amended  by  the  Revenue  Act  of  1917  shall 
remain  in  force  for  the  assessment  and  col¬ 
lection  of  the  income  tax  in  Porto  Rico  and 
the  Philippine  Islands,  except  as  may  be 
otherwise  provided  by  their  respective  legis¬ 
latures. 


First  Class  Mail. 

Sec.  1401.  That  section  1100  of  the  Rev¬ 
enue  Act  of  1917  is  hereby  repealed,  to  take 
effect  on  July  1,  1919,  and  thereafter  the  rate 
of  postage  on  all  mail  matter  of  the  first 
class  shall  be  the  same  as  the  rate  in  force 
on  October  2,  1917 :  Provided,  That  letters 
written  and  mailed  by  soldiers,  sailors,  and 
marines  assigned  to  duty  in  a  foreign  coun¬ 
try  engaged  in  the  present  war  may  be 

—183— 


mailed  free  of  postage,  subject  to  such  rules 
and  regulations  as  may  be  prescribed  by  the 
Postmaster  General. 

Section  1107  of  such  Act  is  hereby  re¬ 
pealed,  to  take  effect  July  11,  1919. 

Parts  Ruled  as  Invalid  Do  Not  Affect  the 

Remainder. 

Sec.  1402.  That  if  any  clause,  sentence, 
paragraph,  or  part  of  this  Act  shall  for  any 
reason  be  adjudged  by  any  court  of  compe¬ 
tent  jurisdiction  to  be  invalid,  such  judg¬ 
ment  shall  not  affect,  impair,  or  invalidate 
the  remainder  of  this  Act,  but  shall  be  con¬ 
fined  in  its  operation  to  the  clause,  sentence, 
paragraph,  or  part  thereof  directly  involved 
in  the  controversy  in  which  such  judgment 
has  been  rendered. 

Further  Acts  Amended. 

Sec.  1403.  That  the  Revenue  Act  of  1916 
is  hereby  amended  by  adding  at  the  end 
thereof  a  section  to  read  as  follows : 

“Sec.  903.  That  this  Act  may  be  cited  as 
the  ‘Revenue  Act  of  1916.’  ” 

Sec.  1404.  That  the  Revenue  Act  of  1917 
is  hereby  amended  by  adding  at  the  end 
thereof  a  section  to  read  as  follows : 

“Sec.  1303.  That  this  Act  may  be  cited 
as  the  ‘Revenue  Act  of  19177  ” 

Sec.  1405.  That  this  Act  may  be  cited  as 
the  “Revenue  Act  of  1918.” 

Additional  Compensation  for  Military  and 
Naval  Forces — Limitations. 

Sec.  1406.  That  all  persons  serving  in  the 
military  or  naval  forces  of  the  United  States 
during  the  present  war  who  have,  since 
April  6,  1917,  resigned  or  been  discharged 
under  honorable  conditions  (or,  in  the  case 
of  reservists,  been  placed  on  inactive  duty), 
or  who  at  any  time  hereafter  (but  not  later 
than  the  termination  of  the  current  enlist¬ 
ment  or  term  of  service)  in  the  case  of  the 
enlisted  personnel  and  female  nurses,  or 
within  one  year  after  the  termination  of  the 
present  war  in  the  case  of  officers,  may  re¬ 
sign  or  be  discharged  under  honorable  con¬ 
ditions  (or,  in  the  case  of  reservists,  be 
placed  on  inactive  duty),  shall  be  paid,  in 
addition  to  all  other  amounts  due  them  in 
pursuance  of  law,  $60  each. 


184 


This  amount  shall  not  be  paid  (1)  to  any 
person  who  though  appointed  or  inducted 
into  the  military  or  naval  forces  on  or  prior 
to  November  11,  1918,  had  not  reported  for 
duty  at  his  station  on  or  prior  to  such  date; 
or  (2)  to  any  person  who  has  already  re¬ 
ceived  one  month’s  pay  under  the  provisions 
of  section  9  of  the  act  entitled  “An  Act  to 
authorize  the  President  to  increase  tempor¬ 
arily  the  military  establishment  of  the 
United  States,”  approved  May  18,  1917;  or 
(3)  to  any  person  who  is  entitled  to  retired 
pay ;  or  (4)  to  the  heirs  or  legal  representa¬ 
tives  of  any  person  entitled  to  any  payment 
under  this  section  who  has  died  or  may  die 
before  receiving  such  payment.  In  the  case 
of  any  person  who  subsequent  to  separation 
from  the  service  as  above  specified  has  been 
appointed  or  inducted  into  the  military  or 
naval  forces  of  the  United  States  and  has 
been  or  is  again  separated  from  the  service 
as  above  specified,  only  one  payment  of  $60 
shall  be  made. 

The  above  amount,  in  the  case  of  separa¬ 
tion  from  the  service  on  or  prior  to  the 
passage  of  this  Act,  shall  be  paid  as  soon  as 
practicable  after  the  passage  of  this  Act, 
and  in  the  case  of  separation  from  the  serv¬ 
ice  after  the  passage  of  this  Act  shall  be  paid 
at  the  time  of  such  separation. 

The  amounts  herein  provided  for  shall  be 
paid  out  of  the  appropriations  for  “pay  of 
the  army”  and  “pay  of  the  navy,”  respec¬ 
tively,  by  such  disbursing  officers  as  may  be 
designated  by  the  Secretary  of  War  and  the 
Secretary  of  the  Navy. 

The  Secretary  of  War  and  the  Secretary 
of  the  Navy  respectively  shall  make  all  reg¬ 
ulations  necessary  for  the  enforcement  of 
the  provisions  of  this  section. 

Intoxicating  Liquors  in  Interstate 
Commerce — Applicable  to  District 
of  Columbia. 

Sec.  1407.  That  the  provisions  of  section 
5  of  the  Act  entitled  “An  Act  making  ap¬ 
propriations  for  the  service  of  the  Post 
Office  Department  for  the  fiscal  year  ending 
June  30,  1918,  and  for  other  purposes,”  ap¬ 
proved  March  3,  1917,  relating  to  intoxicat¬ 
ing  liquors  in  interstate  commerce,  as 
amended  by  section  1110  of  an  Act  entitled 

—185— 


“An  Act  to  provide  revenue  to  defray  war 
expenses,  and  for  other  purposes,”  ap¬ 
proved  October  3,  1917,  be,  and  the  same 
are  hereby,  made  applicable  to  the  District 
of  Columbia. 

Contracts  With  U.  S.  Government — Copies 

Filed — Penalty. 

Sec.  1408.  That  every  person  who  on  or 
after  April  6,  1917,  has  entered  into  any  con¬ 
tract,  undertaking-,  or  agreement  with  the 
United  States,  or  with  any  department, 
bureau,  officer,  commission,  board,  or 
agency  under  the  United  States  or  acting  in 
its  behalf,  or  with  any  other  person  having 
contract  relations  with  the  United  States, 
for  the  performance  of  any  work  or  the 
supplying  of  any  materials  or  property  for 
the  use  of  or  for  the  account  of.  the  United 
States,  shall,  within  thirty  days  after  a  re¬ 
quest  of  the  Commissioner  therefor,  file  with 
the  Commissioner  a  true  and  correct  copy 
of  every  such  contract,  undertaking,  or 
agreement. 

Whoever  fails  to  comply  with  such  re¬ 
quest  of  the  Commissioner  shall  be  guilty  of 
a  misdemeanor  and  shall  be  punished  by  a 
fine  of  not  more  than  $1,000,  or  by  imprison¬ 
ment  for  not  more  than  one  year,  or  both. 
Commissioner  to  Have  Access  to  Informa¬ 
tion  on  Contracts. 

The  Commissioner  shall  (when  not  vio¬ 
lative  of  the  technical  military  or  naval  se¬ 
crets  of  the  Government)  have  access  to  all 
information  and  data  relating  to  any  such 
contract,  undertaking,  or  agreement,  in  the 
possession,  control  or  custody  of  any  de¬ 
partment,  bureau,  board,  agency,  officer  or 
commission  of  the  United  States  and  may 
call  upon  any  such  department,  bureau, 
board,  agency,  officer  or  commission  for  a 
full  statement  and  description  of  any  allow¬ 
ance  for  amortization,  obsolescence,  depre¬ 
ciation  or  loss,  or  of  any  valuation,  appraisal, 
adjustment  or  final  settlement,  made  in  pur¬ 
suance  of  any  such  contract,  undertaking,  or 

agreement.  gecomes  Effective. 

Sec.  1409.  That  unless  otherwise  herein 
specially  provided,  this  Act  shall  take  effect 
on  the  day  following  its  passage. 

Approved,  February  24,  1919. 

—186— 


INDEX 


Pages 

.  1 


Title  I. — General  Definitions . 

“Person”  —  “Corporation”  —  “Domes¬ 
tic”  —  “Foreign”  —  “United  States” 

—  “Secretary”  —  “Commissioner” — 
“Collector”  —  “Revenue  Act  of  1916” 

—  “Revenue  Act  of  1917”  —  “Tax¬ 
payer”  —  “Government  Contract”  — 
“Military  or  Naval  Forces  of  the 
United  States”  —  “Present  War”... Sec.  1 


Title  II. — Income  Tax 


2 


Part  I. — General  Provisions. 


Definitions:  “Taxable  Year” — 

“Fiduciary”  —  “Withholding 
Agent” — “Personal  Service  Cor¬ 
poration”— “Paid”  . 

Dividends — Distribution  of.  Stock 
Dividends.  When  Distribution 
Considered  from  Profits  of  Pre¬ 
ceding  Taxable  Year . 

Basis  for  Determining  Gain  or 
Loss — Value  of  Property  Deter¬ 
mined.  Exchange  of  Property 
Loss  or  Gain  Determined — Con- 
'  solidation,  Merger  —  Exchange 

of  Similar  Values  . 

Inventories  . 

Net  Losses.  Excess  Payments — De¬ 
ductible  Succeeding  Year . 

Fiscal  Year  with  Different  Rates — 
Method  of  Determining  and  Ap¬ 
plying  the  Different  Rates . 

Parts  of  Income  Subject  to  Rates 
for  Different  Years — Method  of 
Determining  Same  . 


Sec.  200 


”  201 

”  202 
”  203 

”  204 
”  205 
”  206 


Part  II. — Individuals. 

Normal  Tax  .  ”  210 

Surtax.  Sale  of  Mines,  Oil  or  Gas 
Wells — How  Valued — How  Taxed  ”  211 
Net  Income  Defined — Basis  of  Com¬ 
putations — Accounting  Methods — 

Fiscal  or  Calendar  Year .  ”  212 

Gross  Income  Defined.  Items  Not 
Taxable — Exemptions.  Income  of 
Foreign  Governments  from  In¬ 
vestments  in  the  United  States. 
Nonresident  Alien  Individuals — 

Gross  Income  Defined .  ”  213 

Deductions  Allowed.  Necessary 
Expenses  of  Business.  Interest — 

When  Deductible.  Taxes,  Paid  or 
Accrued,  When  Allowed  as  a 
Credit.  Losses  Sustained.  Worth¬ 
less  Debts.  Exhaustion,  Wear 
and  Tear.  Contributions  or  Gifts. 

Claim  in  Abatement.  Deductions 

Not  Allowed  Nonresident  Aliens  ”  214 


—187— 


INDEX — Continued. 

Items  Not  Deductible . 

Credits  Allowed.  Amounts  Pre¬ 
viously  Taxed.  Interest  on  Obliga¬ 
tions  of  United  States.  Specific 
Personal  Exemptions.  Credits  to 
Nonresident  Aliens,  Conditional . 
Nonresident  Aliens — Allowance  of 

Deductions  and  Credits . 

Partnerships  and  Personal  Service 
Corporations — Exempt  as  Such — 

Individual  Liability  . 

Estates  and  Trusts.  Periodical  Dis¬ 
tributions — Income  for  Future 
Distribution — Fiduciary  Responsi¬ 
bility.  Deductions — Credits — Do¬ 
nations,  When  Exempt . 

Profits  of  Corporations  Taxable  to 
Stockholders — When  Formed  to 

Evade  Tax  . 

Payment  of  Tax  at  Source.  De¬ 
ductions  Allowed — Claims  Filed. 
Returns  —  Payment.  Payments 
Not  Re-collectible  from  With- 

holding  Agent  . 

Credits  for  Taxes.  Citizens.  Alien 
Residents.  Members  of  Partner¬ 
ships — Estates.  Credits — Differ¬ 

ences  Arising — Penal  Bonds.  Sat¬ 
isfactory  Evidence  . 

Individual  Returns.  Single  and 
Married  Persons.  Returns  by 

Agent  . . 

Partnership  Returns  . 

Fiduciary  Returns  . 

Returns  When  Accounting  Period 
Changed.  Basis  of  Computation 
Time  and  Place  for  Filing  Returns. 

Extensions  by  Commissioner.... 
Understatement  in  Returns.  Appeal 
from  Increased  Return . 

Part  III. — Corporations. 

Tax  on  Corporations.  Year  1918. 
Succeeding  Years.  Transporta¬ 
tion  Systems  . 

Conditional  and  Other  Exemptions. 
Fraternal  Beneficiary  Societies. 
Building  and  Loan  Associations 
— Co-operative  Banks.  Cemetery 
Companies.  Religious,  Charitable, 
Scientific,  Educational  Corpora¬ 
tions.  Business  Leagues — Cham¬ 
bers  of  Commerce — Boards  of 
Trade,  Clubs.  Mutual  Hail,  Cy¬ 
clone,  Fire  Insurance  or  Other 
Like  Companies.  Title  Holding 
Companies  for  Exempt  Corpora¬ 
tions.  Federal  Land  Banks — Na¬ 
tional  Farm  Loan  Associations.. 

Net  Income  Defined . 

Gross  Income  Defined,  Life  Insur¬ 
ance  Companies.  Foreign  Cor¬ 
porations  . 


Pages 

Sec.  215 

”  216 
”  217 

”  218 

”  219 
”  220 

”  221 

”  222 

”  223 
”  224 
”  225 

”  226 

”  227 

”  228 

”  230 


”  231 
”  232 

”  233 


—188— 


INDEX — Continued. 

Pagrea 

Deductions  Allowed.  Expenses.  In¬ 
terest.  Taxes — Exceptions.  Losses 
Sustained  —  Worthless  Debts. 

Dividends  Previously  Taxed.  Ex¬ 
haustion,  Wear  and  Tear — Amor¬ 
tization.  Mines,  Oil  and  Gas 
Wells  —  Depletion  —  Deprecia¬ 
tion.  Insurance  Companies  — 

Reserve  Funds.  Mutual  Marine 
Insurance  Companies.  Other  Mu¬ 
tual  Insurance  Companies.  Losses 
— Claim  in  Abatement — Disallow¬ 
ance  of  Claim  . Sec.  234 

Items  Not  Deductible. .  ”  235 

Credits  Allowed.  Interest  on  U.  S. 

Obligations.  Other  Credits.  Spe¬ 
cific  Credits  .  ”  236 

Payment  of  Tax  at  Source.  Foreign 

Corporations  .  ”  237 

Credit  for  Taxes.  Domestic  Cor¬ 
poration  Foreign  Payments.  Evi¬ 
dence  of  Payment .  ”  238 

Corporation  Returns.  Requirements 
for  Trustees,  Receivers,  and 
Agents  for  Foreign  Corporations  ”  239 
Consolidated  Returns,  How  Consid¬ 
ered — Computed.  Specific  Credits. 
Corporations  —  When  Deemed 
Affiliated.  Domestic  Corporation 
Controlling  Foreign  Corporation  ”  240 
Time  and  Place  for  Filing  Returns  ”  241 

Part  IV. — Administrative  Provisions. 

Payment  of  Taxes.  Four  Install¬ 
ments — Extension  of  Time — In¬ 
terest — Non-payment  Matures  All 
Installments.  One  Payment  Op¬ 
tional.  Errors  in  Payments — Ad¬ 
justments — Interest.  Fraudulent 
Statements.  Additional  Tax'  and 
Interest  on  Unpaid  Taxes.  Re¬ 
turns,  Sufficient  Notice.  War¬ 
rant  of  Distraint,  $5.00.  Depar¬ 
ture  or  Removal  from  United 
States  to  Avoid  Tax — Security 


for  Payment  of  Tax .  ”  250 

Receipts  for  Taxes  .  ”  251 

Refunds  .  ”  252 

Penalties  .  ”  253 

Returns  of  Payments  of  Dividends  ”  254 
Returns  of  Brokers — List  of  Cus¬ 
tomers  and  Transactions .  ”  255 

Information  at  Source.  Interest  on 
Obligations  of  Foreign  Corpora¬ 
tions  .  ”  256 

Returns  to  Be  Public  Records. 

Open  Only  on  Presidential  Or¬ 
der  —  Returns  Accessible  to 
Stockholders — Penalty  for  Dis¬ 
closure.  List  of  Income-Tax 

Payers  Available  .  ”  257 

Publication  of  Statistics,  Annually.  ”  258 


—189— 


INDEX— Continued. 


Pages 


Collection  of  Foreign  Items.  Li¬ 
cense  Necessary  . Sec.  259 

Citizens  of  United  States  Posses¬ 
sions.  Tax  on  Income  from 

United  States  .  ”  260 

Porto  Rico  and  Philippine  Islands..  ”  261 


Title  III. — War-Profits  and  Excess- 

Profits  Tax  . 

Part  I. — General  Definitions. 

“Taxable  Year”  —  “Fiscal  Year”  — 
“Personal  Service  Corporation” 

—  “Paid  or  Accrued”  —  “Divi¬ 
dends”  . Sec.  300 

Part  II. — Imposition  of  Tax. 

Rates — Year  1918.  Year  1919  and 
Succeeding  Years.  Income,  Ex¬ 
cess  of  $10,000,  on  Government 
Contracts.  Transportation  Sys¬ 


tems  .  ”  301 

Basis  of  Computation .  ”  302 

Income  Partly  Derived  from  Per¬ 
sonal  Service  Corporation .  ”  303 

Corporations — When  Exempt.  Gold 

Mining-  .  ”  304 

Apportionment  of  Exemption .  ”  305 

Part  III. — Credits. 

Prewar  Period  Defined  .  ”  310 

War-Profits  Credits.  Specific  Ex¬ 
emptions.  Method  of  Determina¬ 
tion.  Foreign  Corporations  Not 
Entitled  to  Specific  Exemption...  ”  311 

Excess-Profits  Exemption .  ”  312 

Part  IV. — Net  Income. 

Method  of  Determination .  ”  320 

Part  V. — Invested  Capital. 

“Intangible  Property”  —  “Tangible 
Property”  —  “Personal  Capital” 

— “Inadmissible  Assets”  —  “Ad¬ 
missible  Assets.”  Par  Value  of 

Stock  .  ”  325 

“Invested  Capital.”  Cash  Value  of 
Tangible  -  Property.  Surplus  and 
Undivided  Profits.  Intangible 
Property  Paid  in  for  Stock.  In¬ 
vested  Capital  Deductions.  Av¬ 
erage  Invested  Capital  .  ”  326 

Determination  of  Invested  Capital..  ”  327 

Computations — Conditions.  Commis¬ 
sioner’s  Record — Report  to  Con¬ 
gress  .  ”  328 


Part  VI. — Reorganizations. 

Sec.  330  and  331 


59 


—190— 


INDEX — Continued. 

Pages 

Part  VII. — Miscellaneous. 

Corporations  Other  Than  Personal 
Service  Corporations.  Tax  Com¬ 
putation  for  Fiscal  Year  Begin¬ 
ning  in  1918,  Ending  in  1919 — 

Refunds  . Sec.  335 

Corporations  Not  Exempt,  to 

Make  Returns  .  ”  336 

Sale  of  Mines,  Oil  or  Gas  Wells..  ”  337 

Title  IV. — Estate  Tax .  75 

Definitions  :  “Executor”  —  “Col¬ 
lector”  . Sec.  400 

Rates.  Exemptions — Army  or  Navy 

Service  . ,. ..  ”  401 

Determination  of  Gross  Estate .  ”  402 

Determination  of  Net  Estate.  Resi¬ 
dent  Deductions — Gifts,  Etc., 

When  Exempt — Specific  Deduc¬ 
tions.  Nonresident  Deductions — 

Gifts,  Etc.,  When  Exempt.  Re¬ 
funds  .  ”  403 

Duties  of  Executor.  Returns — 

When  Made — Inability  to  Make 

Complete  Returns  .  ”  404 

Administration  Not  Granted — No 

Return — False  Return  .  ”  405 

Tax— When  Due  .  ”  406 

Payments  When  Correct  Amount 
Is  Not  Determinable — Refund. 

Receipts  .  ”  407 

Failure  to  Pay — Proceedings.  Prop¬ 
erty  Passing  to  Person  Other 
Than  Executor — How  Computed  ”  408 

Unpaid  Taxes  Lien  on  Gross  Es¬ 
tate.  Transfer  by  Decedent .  ”  409 

False  Return — Penalty.  Withhold¬ 
ing  Records,  Information,  Prop¬ 
erty — Penalty  .  ”  410 

Title  V. — Tax  on  Transportation  and 
Other  Facilities,  and  on  In¬ 
surance  .  85 

Transportation.  Telephone,  Tele¬ 
graph,  Etc.  Exemptions . Sec.  500 

By  Whom  Paid.  Mileage  Books. 

When  Applied.  Transportation 

by  Pipe  Line  .  ”  501 

By  Whom  Collected — Returns  and 
Payments  Monthly  —  Refunds. 

Delayed  Payment  Penalty  .  ”  502 

Insurance — Rates.  Exemptions -  ”  503 

Returns.  Delayed  Payment  Penalty  ”  504 

Title  VI. — Tax  on  Beverages .  92 

Distilled  Spirits.  Taxes  Not  Due 
or  Payable  During  Period  of  Pro¬ 
hibition.  After  Prohibition  Pe¬ 
riod.  Distilled  Spirits,  Etc.,  in 
Warehouse  When  Prohibition 
Takes  Effect.  Perfumes . Sec.  600 

—191— 


INDEX — Continued. 

Pages 

Importation  of  Spirits  from  Vir¬ 
gin  Islands,  Porto  Rico  and 

Philippines  . Sec.  601 

Transfer  of  Spirits.  Ethyl  Al¬ 
cohol  Excepted  . .  ”  602 

Removal  of  Ethyl  Alcohol .  ”  603 

Floor  Tax  on  Distilled  Spirits....  ”  604 

Rectified  Spirits.  Floor  Tax. 

Cordials  or  Liqueurs.  Rectifier 

of  Spirits.  Penalty  .  ”  605 

Stamps  —  Exchange  of  —  Discon¬ 
tinuance  of  .  ”  606 

Installation  of  Meters  and  Other 
Apparatus  for  Protection  of 

Revenue  .  ”  607 

Fermented  Liquor  Tax  .  ”  608 

Transfers  Between  Warehouse  or 

Breweries  Not  Taxable .  ”  609 

Natural  Wine  Defined  .  ”  610 

Still  Wines — Rates  . ; .  ”  611 

Grape  Brandy  or  Wine  Spirits  for 

Fortification  .  ”  612 

Other  Domestic  or  Imported 

Spirits  .  ”  613 

Floor  Tax .  ”  614-615 

Removal  for  Sale — Stamp  Tax — 

Inventory  —  Marking  —  Label¬ 
ing  —  Exceptions  .  ”  616 


Preparation  of  Sweet  Wines — 

Credits.  Fortification  of  Wines. 
Withdrawal  of  Wine  Spirits...  ”  617 
Removal  of  Domestic  Wines. 

Production  of  Grape  Wine....  ”  618 
Tax  Assessment  Permissible  In¬ 
stead  of  Stamps  on  Imported 


Still  Wines  .  ”  619 

Penalty  .  ”  620 

Meters,  Etc.,  Installed  .  ”  621 

Allowance  for  Loss  .  ”  622 

Beer  Formulae  Process  .  ”  623 

Transfer  of  Distilled  Spirits....  ”  624 

Brandies  Conditionally  Exempt 

— Formulae  .  ”  625 

Gin  .  ”  626 

Penalty  .  ”  627 

Soft  Drinks.  Waters  .  ”  628 

Monthly  Returns — Notice  .  ”  629 

Soft  Drinks.  Ice  Cream — Retail.  ”  630 


Title  VII. — Tax  on  Cigars,  Tobacco, 


and  Manufactures  Thereof  ...  116 

Cigars — Rates.  Cigarettes — Rates. 

Retail  Price.  Cigars — Labeling. 

Cigarettes — Labeling  . Sec.  700 

Tobacco  and  Snuff.  Preparation — 

Packages.  Labeling — Marking.  ”  701 

Floor  Tax .  ”  702 

Cigarette  Papers  and  Tubes .  ”  703 

Dealers  in  Leaf  Tobacco — Re¬ 
quirements.  Penalty  .  ”  704 


—192— 


INDEX — Continued. 

Pagres 

Title  VIII. — Tax  on  Admissions  and 

Dues  .  122 

Passes  or  Free  Admissions.  Ad¬ 
ditional  Tax  on  Ticket  Brokers’ 

Excess  Price  on  Ticket.  Leased 
Boxes  or  Seats.  Roof  Gardens, 

Cabarets.  Admissions  —  When 
Exempt.  “Admission”  Defined. 

Price  of  Ticket  Printed  There¬ 
on — Name  of  Vendor — Penalty.Sec.  800 
Club  Dues  or  Membership  Fees 


— Exemptions  .  ”  801 

Collections — Returns  .  ”  802 


Title  IX. — Excise  Taxes 


126 


Percentage  Rates  on  Specific 


Articles.  Wholesale  Price  May 

Apply  to  Retail  Sale  . Sec.  900 

Undervaluation — Adjustment  _  ”  901 

Sculpture,  Paintings,  Works  of 

Art  .  ”  902 

Monthly  Returns — Penalty  .  ”  903 

Rates  on  Excess  Value — Miscel¬ 
laneous,  Exceptions.  Vendor  to 

Collect  and  Make  Return .  ”  904 

Jewelry.  Returns — Penalty .  ”  905 

Positive  Motion-Picture  Films...  ”  906 
Toilet  Articles — Proprietary  Med¬ 
icines.  Method  of  Collection 
Optional  With  Commissioner..  ”  907 

Title  X. — Special  Taxes  .  134 


Capital  Tax.  Domestic  Corpo¬ 
ration.  Foreign  Corporation. 
Insurance  Companies.  When 

Tax  Not  Applicable  . Sec.  1000 

“Brokers”  —  “Pawnbrokers”  — 
“Shipbrokers”  and  “Custom 
Brokers”  Defined.  Taxes  As¬ 
sessed.  Theatres,  Museums  and 
Concert  Halls  —  Schedule  of 
Taxes  —  When  Exempt  —  Less 
in  Smaller  Towns.  Circuses. 

Other  Public  Exhibitions. — Ex¬ 
emptions.  Bowling  Alleys  and 
Billiard  Rooms.  Shooting  Gal¬ 
leries.  Riding  Academies.  Au¬ 
tos  for  Hire.  Brewer,  Distiller, 

Dealer — Additional  Tax  in  Dry 
States.  Payment  of  Tax  No  Ex¬ 
emption  From  State  Penalties  ”  1001 

Manufacturers  of  Tobacco, 

Cigars,  Cigarettes.  Manufac¬ 
turers  Within  Each  Class .  ”  1002 

Tax  on  Use  of  Yachts,  Pleasure, 

Power  and  Sailing  Boats — 
Schedule.  Apportionment  of 
Tax.  Taxes  Paid,  A  Credit...  ”  1003 

Use  of  Receipts.  Credit .  ”  1004 

Penalty  .  ”  10Q5 


—193— 


INDEX— Continued. 

Pages 

Opium,  Coca  Leaves — Registra¬ 
tion  of  Persons  Engaged,  and 
Place  of  Business.  Schedule. 

Definitions  of  Terms.  Registra¬ 
tion  —  Exceptions.  Unlawful 
Operation.  “Persons”  Defined. 

Tax  on  Products.  Additional  to 
Import  Duty.  Unlawful  Acts — 

Prima  Facie  Evidence — Excep¬ 
tions.  Disposition  of  Stamps. 

Unstamped  Packages  Forfeited. 

Records  Kept  and  Monthly  Re¬ 
turns  Rendered  . Sec.  1006 

Provisions  Not  Applicable  to 
Preparations  Containing  Mi¬ 
nute  Quantities  or  for  External 

Use — Evasion  .  ”  1007 

Drugs  Seized — Disposition  .  ”  1008 

Former  Provisions  Repealed....  ”  1009 

Title  XI. — Stamp  Taxes .  148 

Instruments  Requiring  Stamps 

— In  Lieu  of  Other  Tax .  ”  1100 

Instruments  Exempt  from  Tax..  ”  1101 

Fraudulent  Acts — Penalty . 1 102-1 103 

Method  of  Stamp  Cancellation..  ”  1104 
Preparation  and  Distribution....  ”  1105 
Quantity  Furnished  —  To  Post¬ 
master-General.  To  Assistant 
Treasurers  .  ”  1106 

SCHEDULE  A. 

Stamp  Taxes  on  Bonds  of  In¬ 
debtedness  ;  Bonds,  Indemnity 
and  Surety;  Capital  Stock,  Is¬ 
sued.  Stamps  Attached  to 
Stock  Books.  Capital  Stock, 

Sales  or  Transfers  —  Exemp¬ 
tions.  Produce,  Sales  of,  On 
Exchange.  Cash  Sales.  Drafts 
and  Checks.  When  Not  Ap¬ 
plicable  to  Promissory  Notes. 
Conveyances.  Entry  or  With¬ 
drawal  of  Goods  at  Custom¬ 
house.  Passenger  Tickets. 

Proxies.  Powers  of  Attorney. 

Playing  Cards.  Parcel  Post 
Packages.  Insurance  on  Prop¬ 
erty — Re-insurance.  Person  or 
Agent  Receiving  Insurance  to 
Affix  Stamps — Penalty  .  ”  1107 

Title  XII. — Tax  on  Employment  of 

Child  Labor  .  159 

Regulations  and  Limitations _ Sec.  1200 

Method  of  Computation .  ”  1201 

Sale  at  Less  Than  Market  Price  ”  1202 

Mistake  as  to  Age — Penalty  for 

False  Statement  .  ”  1203 

Returns— When  Made  .  ”  1204 


—194 


INDEX — Continued. 


Pages 

Assessment — Notice  . Sec.  1205 

Inspection  of  Premises — Penalty 

for  Obstructing .  ”  1206 

Taxable  Year  and  First  Taxable 
Year  Defined  .  ”  1207 

Title  XIII. — General  Administrative 

Provisions  .  163 

Salaries:  Commissioner  . Sec.  1300 

Assistant  Commissioner.  Col¬ 
lectors.  Appropriation  Distri¬ 
bution.  Advisory  Tax  Board 
Membership — Vacancies  —  Sal¬ 
aries.  Board  to  Interpret  Tax 
Laws.  Office  in  Washington, 

D.  C.  Other  Authorities  of 


Board  .  ”  1301 

Leave  of  Absence  .  ”  1302 

Legislative  Drafting  Service  — 

Duties.  Appropriation.  Im¬ 
ports  From  Virgin  Islands _  ”  1304 

Administrative  and  Other  Pro¬ 
visions  Extended  to  This  Act. 

Examination  of  Returns .  ”  1305 

Floor  Tax  Requires  Sworn  Re¬ 
turns  .  ”  1306 

Method  of  Tax  Collection .  ”  1307 

Evasion  —  Penalty.  Person  De¬ 
fined  .  ”  1308 

Rules  and  Regulations  by  Com¬ 
missioner  .  ”  1309 

Overpayment.  Credit  Sales.  Right 
of  Vendor  to  Recover.  Tax  Not 
Applicable  to  Exports — Re¬ 
funds  .  ”  1310 

Increased  Rates  Paid  by  Stamps 
on  Hand  .  ”  1311 


Contracts  Made  Prior  to  May  9, 

1917.  Prior  to  September  3, 

1918.  Taxes  to  Vendor.  Dealer 

Defined.  Fraction  of  Cent  ....  ”  1313 

United  States  Certificates  of  In¬ 
debtedness — Checks —  Accepted 

at  Par  .  ”  1314 

Stamps  Issued  for  Restamping 

Packages  . ”  1315 

Refunds.  No  Refund  on  Second 
Assessment  —  Exception.  Sec¬ 
tions  Amended .  ”  1316 

Collectors  to  Report  Violations. 
Administer  Oaths.  Unlawful  to 
Divulge  Information — Penalty. 

All  Persons  Subject  to  Tax, 

Listed.  Returns — Particulars — 
Penalty.  Failure  to  File.  Proce¬ 


dure — Additional  Tax  .  ”  1317 

Jurisdiction  of  District  Courts..  ”  1318 

False  Statement,  at  Time  of  Sale, 

as  to  Tax  Paid .  ”  1319 

Penal  Bonds — U.  S.  Bonds  as 
Security  at  Par — Return  of 
Bonds — Limitations  .  ”  1320 


—195— 


196— 


